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Another article on speculation in oil markets. BTW I'm going to have another one or two articles on this topic over the next few months, but each will make different (though overlapping) points, tailored to the specific outlet.
posted by Bob Murphy @ 11:39 PM
9 Comments
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9 Comments:
No, I didn't see that comment. I like the part about commodities not in index funds going up as much as others.
However, there is a (by now) standard counterresponse to the inventory argument: people say that Saudi Arabia cut back production because of higher expected future prices.
I don't know if that fits the data--I still need to check all this for the next article I write on the topic--but it is theoretically possible that speculators could be driving up oil prices, and yet inventories don't accumulate.
No, I don't think I've seen that point elsewhere.
From 2005 to 2006, according to the EIA, Saudi Arabia's output dropped 3.9%. (I had that at my fingertips for something else.) I'm not sure what the more recent stuff will show.
"A builder holding on to his bulding in antcipation of a higher price? A sports star holding out for a higher price? etc."
I'm not sure what ISN'T speculation, but those two actions certainly ARE speculation.
You guys are right, but if outside institutional investors changed futures prices, and this induced Saudis to cut back production, then it would be loosely correct to say, "Speculators are responsible for higher oil prices."
Of course, if the institutional investors anticipated a war with Iran, sudden jump in demand for oil in 2009, etc., then it would be a good thing that they pushed up oil prices in the present.
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