Crude Villains?

A hedge-fund pro says big institutional investors are behind run-ups in oil and other commodities. Where's Will Rogers when you need him?

IF STUPIDITY GOT US INTO THIS MESS, THEN WHY CAN'T it get us out?"

What made the stock market metamorphose from spirited advance into straggly decline was that the euphoria induced by the conviction that the worst of the credit crunch was over and the menace of recession was receding ran smack up against reality and, as in any collision between evanescent vapor and gritty substance, it's no contest which gets creamed.

That last item -- the rising ardor in Washington to do something to shackle the big, bad speculators in commodities and especially oil and gas -- drew some fuel from both interested and disinterested parties. Good old OPEC, in the person of its secretary-general, Abdalla Salem El-Badri, denied that it had the slightest thing to do with soaring crude prices. Gosh, who could ever harbor such an unkind thought? The blame, El-Badri emphasized, should be laid squarely at the door of those market-kiting speculators.

He is not, in case you wondered, the disinterested party mentioned above. That designation, by his own vouching, belongs to a fellow named Michael Masters, proprietor of a hedge fund unsurprisingly called Masters Capital Management, who testified last week before a Senate subcommittee. The burden of his presentation was that such deep-pocket investors as corporate and government pension funds, sovereign wealth funds, university endowments and kindred institutions are in no small measure responsible for the spectacular run-ups in commodities, particularly food and, of course, oil.

Mr. Masters seems well versed in the fine points of commodities trading, and he's passionate in his belief that the major stimulus for the fiery gains in oil and food are those big-bucks players. His testimony created a bit of a buzz in the Street, and it's certainly worth a read. That speculators -- especially in the past five or six months, when their normal haunts, the equity markets, were frequently in the dumps -- have been active in the futures arena is no secret. Ironically, we recall a similar plaint -- but in reverse -- made to us by a prominent Texas oil guy who beefed bitterly that speculators were behind the then sharply depressed price of oil.

To Peter, the big move in crude and gasoline is symptomatic of the bill that has come due for years of reckless consumption and dollar devaluation that have priced us out of markets to which we once held "unchallenged title." Signs of America's falling standard of living are everywhere, he laments.

And he posits that the current round of belt-tightening is "simply the down payment on the government's massive bailout of Wall Street investment banks and mortgage lenders." And he morosely predicts, "As the Fed creates money to buy bad mortgages and other shaky securities held by banks and brokerage firms, the value of the savings and wages" of us poor slobs will continue to shrivel.

That means that the cost of a good many more of the things that we take for granted will shoot up. "Four dollar gasoline," he warns, "is just the beginning."