Oil Speculators To Blame For Record Gas Prices After All

From Consumerist

If you thought oil speculators as the reason behind the historic gas prices spikes of this summer was debunked, think again. From '07 to when the price of oil collapsed, supply increased and demand dropped. According to basic economic theory, this should've meant the price went down. But all of a sudden an influx of capital, an infusion that brought the total at play from $13 billion to $300 billion, brought to market by large investment bankers, exploiting de-regulation and trading in black box private exchanges made possible by Enron, drove the price of oil from $69 to almost $150. A new 60 Minutes report explores the issue.
RedSkysays...

Yes, but excessive speculation is also a symptom of general increased uncertainty over the price, and has to be somehow founded in the expectation that prices will either rapidly rise or diminish. Unless that is, you believe fluctuations in prices are brought about by colluding, manipulative investors in shadowy gatherings in the first place and not in any way by Middle Eastern/Russian instability which given the size of it is certainly plausible.

Then again, collusion-free speculation by itself can certainly exacerbate the problem in a vicious cycle feeding on itself and creating more. Also, while demand from China/India cannot drop precipitously over a brief period, expectations of future demand and therefore price levels may. The release of a critical and in particular unexpected economic statistic may revise expectation substantially for example.

HollywoodBobsays...

The oil prices sky rocketing is exactly what should have been expected once the people holding the commodity stocks learned they could manipulate the prices by fiddling with the speculation market. They drove up their own prices so they could make insane amounts of money. That's why there used to be regulations preventing that sort of business.

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