Oil Price Blame Game: What's Really Needed Is Energy Policy

Some are blaming speculators. Others are blaming prop trading desks (it must be Goldman!). Other blame oil companies, or the Saudis. Or the Russians.

Welcome to the Street's favorite parlor game: blame some shadowy force for the rise in oil. Never mind that there is 85 million barrels of oil produced a day, and scant supply anywhere. There has to be something more than a global supply/demand imbalance at work here. Someone is sitting in a room somewhere, manipulating all this. We just have to find him and expose him.

Last week, we had notes from several respected commentators. Charles Biderman at TrimTabs released a note with this title: "Oil Producers Could Easily Be Manipulating Oil Prices through Funds of Hedge Funds Helped By Ridiculously Low 7% Margin Requirement for Oil Futures. We Don't Know That They Are, But They Could."

That got a lot of play on trading desks. One solution, of course, is to boost margin requirements for oil futures, but given that exchanges and brokers earn significant income from trading lots of contracts, he doubts this is likely. Still, there are efforts underway to do exactly that in Congress.

Biderman proposes an interesting alternative: let governments short oil futures. "If it is logical for oil producers to go long oil futures to enhance the future value of their remaining oil, why is it not logical for oil consumers to go short oil futures? Japan, are you listening?," he asks.

He goes so far as to encourage the U.S. government to spend the roughly $275 m it is saving per month due to suspension of purchases for the Strategic Petroleum Reserve and use that money to short oil!

This kind of talk gets trading desks going, because it: 1) sounds patriotic, 2) might help trader profits, and 3) would be payback to those greedy evil nameless faceless forces manipulating us.

There's a long string of people in line with these theories. Recall last week that Michael Masters, Managing Member of Masters Capital Management, testified in front of the Committee on Homeland Security and Government Affairs of the U.S. Senate, blaming speculators--specifically pension funds and hedge funds--for much of the rise in oil (his testimony is very interesting reading).

Years ago, Richard Hofstadter wrote a famous book called "The Paranoid Strain in American Politics", about the American right's scapegoating of liberals as communists during the McCarthy period. There's something similar developing here: a paranoid strain in American capitalism.

It doesn't mean we shouldn't look into the influence speculators have on the relatively small commodity market. However, let's not lose sight of what we really need: an energy policy.

Questions? Comments? tradertalk@cnbc.com