The paper says that’s a result of the savings glut overseas and because the countries are buying dollars to protect themselves after the Asian “flu” a decade ago. It notes that the investors are getting much lower returns here than Americans are overseas but that has been compensated for by the stability of the U.S. system, something that doesn’t look so great anymore.

But it would have been nice if the Journal had tried to spell out what might happen if the overseas investors began to suddenly pull out their assets. Instead it just bites around the edges, noting that we’re increasingly dependent on undemocratic regimes to prop us up.

More oil; less oil

Saudi Arabia said it will pump 200,000 barrels a day more oil for the rest of 2008. The FT says on its page one that is “completely negated” by a drop in production by Nigeria, where oil facilities continue to be attacked. Late last week, Chevron and Royal Dutch Shell said attacks would keep nearly 350,000 barrels from reaching the market through July.

But in a surprise move, Saudi Arabia said it will push its production capacity to 15 million barrels a day from 11.4 million. The Journal is skeptical:

A capacity increase of that magnitude would be extraordinary for a country that has never produced more than 11 million barrels a day. To get there, Saudi Arabia would have to squeeze greater quantities of oil primarily from huge fields that have been in production since as far back as the 1940s—far from a simple task.

Bloomberg says oil prices rose anyway.

The Journal reports on A7 that speculation now accounts for 70 percent of trading in benchmark oil, nearly double the total 37 percent it did just eight years ago. That’s according to a congressional subcommittee that’s investigating whether Wall Street speculation is driving the energy-price boom.

Bush administration officials, Wall Street banks and federal regulators have taken the position that speculation has played a minimal role in the recent surge in oil prices. But a diverse chorus of institutions and politicians is taking a different view, including the International Monetary Fund, the Saudi Arabian government, some big oil companies and both major presidential candidates.

The main targets of critics of speculative oil trading are pension funds and investment banks that never take physical custody of oil, but instead invest in oil futures contracts as a way to hedge against inflation and diversify their portfolios.

Obama said he would close the “Enron loophole” that prevents government oversight of energy trading, and push for more regulation of energy markets, the Journal and the Associated Press report. McCain has voted against the loophole.

Candidate of the corn

Speaking of Obama, The New York Times on A1 reports on the Democratic nominee’s advisers’ close ties to the ethanol industry, which his positions have supported.

McCain advocates eliminating the billions of dollars of subsidies that the ethanol industry gets a year, and McCain is right.

As a free trade advocate, he also opposes the 54-cent-a-gallon tariff that the United States slaps on imports of ethanol made from sugar cane, which packs more of an energy punch than corn-based ethanol and is cheaper to produce… Mr. Obama, in contrast, favors the subsidies, some of which end up in the hands of the same oil companies he says should be subjected to a windfall profits tax. In the name of helping the United States build “energy independence,” he also supports the tariff, which some economists say may well be illegal under the World Trade Organization’s rules but which his advisers say is not.

We’re sure the ethanol stance was critical for Obama’s campaign in that it helped him win Iowa, but it’s just bad policy. Good reporting by the Times in raising this issue.

Capital spigot starts to close

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.