What is speculation? Today more than ever you may hear this term being used. I personally attribute todays erractic collapse of the financial markets on this activity. It has become a method or process that is no less than playing craps in Vegas. Some may say that it is an educated guess but I think it is more of a gamble. If one has inside knowledge it may be educated but then it also becomes an illegal process if its used to drive or manipulate a market or outcome. Think about oil and the rapid rise in its price. Yes they investigated the process and said it was just a supply and demand issue but look at how it has collapsed just like the housing industry. Why is because the demand process was inflated by investing speculators who realized they could see saw the price up and down and make millions. The bubble has collapsed and oil is now driving back to its real price levels but unfortunately it will not stay there for long because the oil producing nations now know we can pay 3 to 4 dollars a gallon. They will decrease output and in turn create greater demand for less product. Not a good idea at this point considering the state of the world economies. The greed to make a windfall will however eventually bring oil prices to a more stable level until inflation levels world wide are curbed. With all this said understand that speculation is just a process used in the market to guess a future price of a commodity. Example: If the news reports that a pipeline is attacked by a militant group speculators will bid up the price of oil claiming that there will be an expected shortage due to that event. But what if no disruption ever occurs. Another example may be a hurricane has developed in the Gulf of Mexico and could disrupt oil production. Well the price shoots up but the hurricane fizzles and the disruption never happens. This type of speculation was used until oil reached nearly 150 dollars a barrel but was blamed on growing demand. Sure demand grew but not at the rate that forced such an overprice of crude oil prices. Even the Saudi Oil Minister claimed that there was more than enough oil on the market and appears he was right.

Now we will see what the market does. It will be hard for speculators to manipulate oil prices in such a tight economy other than what the market will automatically didctate. Just like the housing fiasco the oil bubble has burst!