Johannesburg — THE leaders of the Group of Eight (G-8) leading industrial nations have tried hard to talk down oil prices during their meeting in Japan, warning of the dangers to the world economy if prices stay too high for too long.

And at last that amorphous market seems to be listening: prices fell in New York for a second day yesterday, taking the decline to more than $8 a barrel from last week's record north of $145. Analysts say signs that the global economy is slowing are prompting traders to doubt the sustainability of the commodities boom and rethink the need to hedge against inflation. Hence the profit taking among oil traders, who have benefited handsomely from a price rise of almost 90% in the past year.

Few doubt that the oil market will remain volatile, especially since the perennial political instability of the world's major oil producing regions has not improved. But the perception of oil as a one-way bet is no longer universal, indicating that the market may be topping out.

And not a moment too soon, from the perspective of both consumers of petroleum products worldwide and those who believe in the free market system. That is because pressure from ailing voters had prompted politicians, especially those in the U.S., to consider rash measures to bring relief. There are several bills in the pipeline in the U.S. Congress to curb speculative activity in the oil market, any one of which is bound to do more harm than good.

While the volume of transactions on the futures markets has almost tripled along with the oil price since 2004, and hedge fund investors have been joined on the bandwagon by pension funds and individuals, there is no evidence that they have led, as opposed to followed, the price upwards. If the current prices were not justified by demand, there would be an oil glut, which is clearly not the case.

Derivative instruments play an important role in today's markets, helping both consumers and producers hedge against volatility. It would be a pity to limit the effectiveness of such a useful tool merely to please the crowd.