I think the kind of structural speculation Chris is describing is much more likely.
Don't forget that gas prices miraculously dropped in the run up to the 2004 election, and started picking up soon after. So I think we can take market manipulation for granted. And given that prices are partly based on futures, it has to be entrenched and systemic manipulation.
So if the 'physical price' - which is an odd concept - is being set deliberately by systemic manipulation, it becomes an input and not an output variable. Prices will stay high because the monopolists want them to, and 'physical price' becomes an irrelevance.
When the casual speculators are getting burned for underestimating the price, it's unlikely their kind of speculation is important.
I'm agnostic about what types of speculation are driving things, but lets not pretend that this is all just about simple demand and supply.
lets not pretend that this is all just about simple demand and supply.
On whose side should the burden of proof be? In the long run, we're all dead. John Maynard Keynes
On the other hand, Jerome rightly points out that on more than one occasion a rally has been caused by speculators rushing out of big bets that the price will go down. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
This is definitely not what is happening with oil and commodities. In the long run, we're all dead. John Maynard Keynes
