The crooners and screamers are out again over the weekend decrying "speculation" in oil futures.

Rick Santelli did a pretty good job of destroying that argument this morning on CNBC, surprisingly enough. He brought up the "inconvenient truth" that on the last day of a given contract, as the day winds down, all speculation must (by definition) cease on that contract, as anyone holding a long at the bell must take delivery, and anyone short at the bell must provide delivery.

He's right of course, but don't expect people to pay attention to the inconvenient thing called "facts" when emotion rules the political landscape.

See, here's the bottom line - if speculative distortions were the "primary drivers" of price, then we would see tremendous distortions in the price of the front month .vs. longer contracts on that last day. $10, 20, 30 or more. That is, if the "actual delivery price" of oil is really $100/bbl, and the speculative premium $30, one minute before the bell on expiration day only those people who will deliver (or take delivery) have open contracts. That last trade is going to take place at the actual delivery price - it simply must, by definition, as these contracts do not cash settle - they settle with actual barrels of oil changing hands for money!

Now is there a "speculative premium" in oil? Well, yes and no. The $250 billion in excess liquidity that is flying around has found a "safe haven" in oil and other commodities.

But this is not "speculative premium" in terms of market manipulation or "evil people", it is people buying oil and oil products as a stable store of value!

And what, pray tell, is wrong with this? We've got Bernanke running around literally shredding The Fed's balance sheet, deprecating US Treasury Bonds as a safe place to hide. He has turned what were pristine credit instruments into used toilet paper with wild abandon, stuck in the Ivory Tower world having made his speeches that "The Fed has a device called a printing press and can always arrest a deflation by using it."

Well Ben? This reminds one of Greenspan's speech when asked about FDIC insurance many years ago, when he said that "we can guarantee that you will receive your dollars, but not what they will be able to purchase."

The truth is that The Fed has not been hyperinflating anything. Liquidity is a loan, not a gift nor printing.