Interagency Task Force on Commodity Markets Releases Interim Report on Crude Oil Washington, DC - Today, the Interagency Task Force on Commodity Markets (Task Force or ITF), chaired by the Commodity Futures Trading Commission (CFTC), released a staff report offering a preliminary assessment of fundamental and market factors affecting the crude oil market. The ITF's Interim Report on Crude Oil studied fundamental supply and demand factors and the roles of various market participants, and it found that fundamental supply and demand factors provide the best explanation for the recent crude oil price increases.
Washington, DC - Today, the Interagency Task Force on Commodity Markets (Task Force or ITF), chaired by the Commodity Futures Trading Commission (CFTC), released a staff report offering a preliminary assessment of fundamental and market factors affecting the crude oil market. The ITF's Interim Report on Crude Oil studied fundamental supply and demand factors and the roles of various market participants, and it found that fundamental supply and demand factors provide the best explanation for the recent crude oil price increases.
And from the actual report (PDF!)
The Task Force's preliminary assessment is that current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors. During this same period, activity on the crude oil futures market - as measured by the number of contracts outstanding, trading activity, and the number of traders - has increased significantly. While these increases broadly coincided with the run-up in crude oil prices, the Task Force's preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.
Remember, the fact that the CFTC launched this study was seen as proof - PROOF! - that speculation was to blame. Never mind, the CFTC must now be part of the conspiracy. In the long run, we're all dead. John Maynard Keynes
No, it hasn't driven the changes but it has greased the response.
Same forcing and more volatility implies faster trend. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
But there's the small fact that a majority of speculative positions lately have been betting on oil prices going down, not up. In the long run, we're all dead. John Maynard Keynes
Whether it is a good or a bad thing that the current price level was reached ahead of time compared to how it would have been with lower market volatility, I don't know.
If you believe that we need a strong price signal for demand destruction and that reductions in demand are overdue, then it's a good thing.
However, if prices overshoot and collapse because the long-term cost of electricity from alternative sources has been exceeded by a long shot, then it might be a bad thing like what happened in the 1980's.
An optimal rate of increase of the price might be as high as possible but such that there is no overshoot and collapse of the price. Speculation probably makes the rate much faster than optimal and guarantees a collapse after new energy infrastructure is developed and the new energy production floods the market (again, a 1980's oil industry scenario) - give it 5 years. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
Using this (simple) Model it is easy to see the effect on pricing of speculation is dependent, in some cases, independent in others. The magnitude of the effect is asymmetrical; always Complex and, under certain conditions, Chaotic.
I can't wait to see a "oil goes down" diary at the oil drum though...
I suppose that the decrease is due to the slowing of economy which is happening in US and UE now, but I'm wondering what TOD will say about it. Ignoring it is bad policy. A free fox in a free henhouse!
I don't see any evidence of trend reversal. Though I'm sure there's a chartist out there that believes a double peak like you can see towards the end of the series is a sign of trend reversal. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
