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August 29, 2008 4:25:58 CDT

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Oil Insanity Pinned to Speculators

Posted Feb 28, 08 5:54 CST in Business 

(Newser) – Crude-oil prices have doubled in recent months, a development not linked to fundamental supply and demand—but rather, observers tell Der Spiegel, to rampant speculation among investors looking for a stable buck. The prospect of recession would typically drive prices down, but analysts say a decade-old oil investment rush by pension funds and big banks has made the market volatile and distorted.

Speculators hold nearly half of all oil contracts, and trading volume is 15 times higher than consumption (due to massive futures contracts). Today’s investors react to miniature world events with roller-coaster rides, and they “will have a rude awakening” when they see how big a gamble they’ve taken. Der Spiegel is not so cavalier as oil barons about the impact of the speculating boom.

Source Der Spiegel

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High gas prices are posted at Shell gas station in San Mateo, Calif., Thursday, Feb. 28, 2008. Crude prices rebounded Thursday, shooting up more than $2 a barrel to a new record as a falling dollar and...   (Associated Press)
A Shell customer selects gas at $4.239 per gallon of regular gas at a Shell gas station in San Mateo, Calif., Thursday, Feb. 28, 2008. Crude prices rebounded Thursday, shooting up more than $2 a barrel...   (Associated Press)
Debbie Stunkard pumps gas at a BP station in Mount Lebanon, Pa., Feb. 19, 2008. Oil prices jumped back above $100 Tuesday after a Texas refinery outage and possible OPEC production cut. (AP Photo/Gene...   (Associated Press)
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recession  • oil  • crude oil  • OPEC  • ExxonMobil  • Morgan Stanley  • Persian Gulf  • Deutsche Bank  • New York Mercantile Exchange  • speculation  • pension funds


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