Speculators Not to Blame for High Oil Prices
June 23, 2008· 16 Comments
A new study authored by IER economist Robert Murphy , Speculators Fixing Oil Prices? Don’t Bet On It , sheds some much needed light on the role speculation plays in the global oil market.
EXECUTIVE SUMMARY
- Record-high oil prices demand a target, and some politicians are increasingly pointing the finger at speculators in the commodities futures markets. But high oil prices are due to restricted supply, booming demand, and a weakening dollar.
- There is no hard evidence that speculators are responsible for high oil prices. If the price of oil truly were above the level that the fundamentals could support, we would see growing inventories of crude. But inventory levels show no such pattern.
- Speculators provide a vital function. By buying when prices are low and selling when prices are high, they actually make oil prices less volatile. Large investment funds provide liquidity to the commodities futures markets, and allow producers and consumers to concentrate on their core businesses.
- Government restrictions on investment in the oil futures market will only hurt consumers by making the oil market less efficient. New regulations will do nothing to ease oil prices in the long term.
Click here for Murphy’s complete analysis. (60KB PDF).
June 23rd, 2008 at 3:33 pm
[...] Institute for Energy Research
June 23rd, 2008 at 3:42 pm
[...] I explain why Michael Masters misses the benefits of investors in commodities futures in this new IER piece. [...]
June 23rd, 2008 at 3:57 pm
[...] I explain why Michael Masters misses the benefits of investors in commodities futures in this new IER piece. [...]
June 23rd, 2008 at 4:19 pm
[...] Obama vows crackdown on energy speculators Institute for Energy Research: Speculators Not to Blame for High Oil Prices [...]
June 23rd, 2008 at 4:20 pm
[...] Institute for Energy Research
June 23rd, 2008 at 7:29 pm
[...] is no link says Robert Murphy (Institute for Energy Research). Paul Krugman comments as well (here and here.) addthis_pub = ‘meatyreads’; addthis_brand = [...]
June 26th, 2008 at 8:30 am
[...] Speculators Fixing Oil Prices? Don’t Bet on It [...]
June 27th, 2008 at 6:48 am
[...] Libertarian economist Robert Murphy reaches the same conclusion. He writes: [...]
July 7th, 2008 at 7:41 am
[...] subtly, institutional investors provide liquidity to the futures market, which enables the commercial producers and consumers of oil to rely more [...]
July 7th, 2008 at 8:23 am
[...] subtly, institutional investors provide liquidity to the futures market, which enables the commercial producers and consumers of oil to rely more [...]
July 7th, 2008 at 3:12 pm
[...] days since I put it on my must read list, but I finally had a chance to read Robert Murphy’s study debunking the often-repeated idea that speculators are to blame for oil [...]
July 30th, 2008 at 2:33 pm
[...] For more on the role of speculation in energy markets: Speculators Not to Blame for High Gas Prices [...]
August 5th, 2008 at 7:41 am
[...] Originally Posted by Vortex Bullshit - look at the dates when ICE was allowed to be a part of the market and how the prices started to increase. Think Enron - Read the report http://www.senate.gov/~levin/newsroom/supporting/2006/PSI.gasandoilspec.062606.pdf And give more to dispute it’s findings than your opinion, if you can. I’m willing to consider a different perspective if it is a report of an actual investigation and/or some learned treatise by someone other than the oil corps and/or the oil speculators. I don’t have time to read this right now. But I will later. Futures trading discourages hoarding. Without speculators willing to take the other side of futures contracts, oil refiners might be inclined to store more oil because of price increases. And right now, oil inventories are at below average levels. So where is all the oil that they are keeping off the market? EIA - Short-Term Energy Outlook Speculators are buying futures, not oil. It is an agreement between a buyer and a seller. Without speculators, you lose liquidity. When futures were banned on wheat and onions in the past, the prices went up…not down. Speculators influence the price up or down in the very short term, but not in the long run. The value of the contract varies right up until delivery. If they had so much influence on price, the prices would drop dramatically prior to delivery. We should look at the fed for the increasing prices. Look what they have done to the value of our dollar. Here is an interesting read. Institute for Energy Research Blog Archive Speculators Not to Blame for High Oil Prices [...]
September 23rd, 2008 at 12:21 pm
[...] Top Five Actions Government Can Take to Lower Gas Prices · Speculators Fixing Oil Prices? Don’t Bet on It · The World’s Biggest Oil Companies Aren’t American, and Aren’t Private · Is it Price [...]
January 6th, 2009 at 9:59 am
[...] who claimed during the oil price run-up that speculation wasn’t responsible were relying on arguments such as the ones I sketched above; they weren’t merely saying “supply [...]
January 26th, 2009 at 4:13 pm
[...] we explained in an IER study issued last summer, the commodities futures markets perform a vital function by allowing parties to [...]