The average trading volume of oil futures is about 890,000 thousand, which equates to about 890 million barrels per day. Yet, the average consumption of oil is less than 20 million barrels per day. While there are certainly some other issues and uses, it does lend some perspective into just how much speculation there is in oil prices.

That sounds ominous and somewhat dangerous, but should not be worrisome . . . as long as it represents a larger universe of knowledgeable traders than mere distributors of oil. The larger the number, the harder it is for market collusion to drive market prices up or down.

Of course, traders can evidence a herd mentality as easily as distributors, and greater numbers might then cause greater volatility in market prices. While there is no evidence that actually happens, it does suggest there is a cost to reducing the odds of market collusion. It is the risk that speculators can get “spooked” and start trading irrationally . . . with consumers eventually paying either higher prices or lower prices. Either way, consumers would not then be paying market prices.