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2014•Unpublished venueRequires access

DID SPECULATION DRIVE OIL PRICES DURING 2003-2008?

Yan Yu

Open publisher page 1 citations

Abstract

The price of crude oil experienced a spike during 2003-2008, and this price spike has attracted a great deal of debate on what caused the high price of crude oil. A new view is that speculation played the major part in driving oil prices. In order to examine the main cause of this price surge, we analyze both the economic fundamentals, which include supply, demand, and inventory, and speculation in the oil futures market. Working’s speculative T index is used to examine whether there is any excessive speculation in the oil futures market during 2003-2008. According Working’s T index, we find little evidence of excessive speculation in oil futures market so that there is little evidence to support the view that speculation has driven the oil prices. Instead, world supply and demand may have played the major role in driving oil prices.

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What this paper is about

The price of crude oil experienced a spike during 2003-2008, and this price spike has attracted a great deal of debate on what caused the high price of crude oil. A new view is that speculation played the major part in driving oil prices. In order to examine the main cause of this price surge, we analyze both the economic fundamentals, which include supply, demand, and inventory, and speculation in the oil futures market. Working’s speculative T index is used to examine whether there is any excessive speculation in the oil futures market during 2003-2008. According Working’s T index, we find little evidence of excessive speculation in oil futures market so that there is little evidence to support the view that speculation has driven the oil prices. Instead, world supply and demand may have played the major role in driving oil prices.

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Available abstract

The price of crude oil experienced a spike during 2003-2008, and this price spike has attracted a great deal of debate on what caused the high price of crude oil. A new view is that speculation played the major part in driving oil prices. In order to examine the main cause of this price surge, we analyze both the economic fundamentals, which include supply, demand, and inventory, and speculation in the oil futures market. Working’s speculative T index is used to examine whether there is any excessive speculation in the oil futures market during 2003-2008. According Working’s T index, we find little evidence of excessive speculation in oil futures market so that there is little evidence to support the view that speculation has driven the oil prices. Instead, world supply and demand may have played the major role in driving oil prices.

Key concepts: Speculation, Futures contract, Oil-storage trade, Economics, Futures market, Order (exchange), Crude oil, Financial economics

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