These features make the oil market vulnerable to speculation.

After all, capitalism is practically a synonym for speculation, isn t it?

Today, they are a household name, synonymous with unruly speculation, boundless greed, and, ultimately, systemic instability.

Using bank credits to speculate in equity and housing markets is still mostly forbidden.

So there is now a risk that the European framework will create an avenue for financial speculation.

It may therefore be tempting to invest in inflation indexed bonds, which adjust both principal and interest payments to offset the effects of changes in price growth.

As a result, speculatively driven high prices can persist for a considerable time before economic fundamentals bring them down, as finally seems to be happening.

And large players have plenty of cash with which to speculate, especially given the United States Federal Reserve s decision to inundate the world with a sea of liquidity.

That was also true of credit default swaps, which became an instrument of speculation instead of insurance and reached an astounding 62 trillion in volume.

Maybe backwardation won t appear on the first day that housing futures are traded, but there is a good chance it will come within a matter of months.

Various catastrophe bonds, covering earthquakes and other disasters, and weather derivatives have begun trading on financial markets in recent years.

In May 2003, Goldman, Sachs Co. began offering cash settled covered warrants on house prices in the United Kingdom, based on the Halifax House Price Index and traded on the London Stock Exchange.

These, together with the external shocks triggered by the volatility of speculative capital flows, drastic terms of trade adjustments and even inflows of remittances, make the potential benefits of structural adjustment and stabilization policies difficult to attain.

A gold standard rule would have produced higher rates for the southern European borrowers, which would have attracted funds to where capital might be productively used, and at the same time acted as a deterrent against purely speculative capital flows.

Another initiative worth watching is the Hong Kong stock exchange s exploratory project to offer a trading platform for emissions derivatives, which will most likely include conventional pollutants as well as carbon.

By providing an incentive for banks to hold more foreign exchange deposits against their loans, the new rules will drive up the price of foreign currency loans, thereby deterring firms from using dollar loans to speculate on renminbi gains.

We don t need self proclaimed serious political newspapers dedicating their front pages to speculate on the king s every sneeze and cough and divert the public s attention from grave issues such as the recent utter failures of Morocco s craven and politically naïve diplomats in addressing the Western Sahara issue.

Despite the oil market s size, speculation can move prices because of the inelasticity of demand and supply. Oil demand is slow to change because of behavioral inertia and fixed technology, while adjusting production takes time.