Bloomberg View: What Obama Can—and Can't—Do About Oil Prices

No one, least of all President Barack Obama, should expect oil or gasoline prices to fall because of the five-point plan he unveiled at the White House on April 17. Obama’s proposal calls for adding staff at the Commodity Futures Trading Commission to monitor oil markets, spending more on information technology to track trading, stiffer penalties for manipulators, limits on the size of the bets speculators can make, and increased disclosure by the CFTC of trading data. There’s almost no chance that the package will pass in Congress, and in any case it would have little effect on near-term prices.

The temptation to blame speculators for higher oil prices, while wrong-headed, has a certain appeal. It’s of a piece with a broader narrative—on display in both the Occupy Wall Street and Tea Party movements—that the benefits of growth are going to an ever-narrower slice of the populace. Yet speculators serve a vital purpose: helping create a market of buyers and sellers. Many academic researchers have found that speculators, by anticipating future price moves, can reduce volatility.