Has speculation contributed to unwarranted oil price increases?
From the beginning to the end of 2008, the price of a barrel of crude oil on the New York Mercantile Exchange (NYMEX) moved from $99.64 to $145.29 to $33.87. On the way up, it took just 103 days of trading for the price of crude to soar 67 percent (more than $58 per barrel) to its July 3 peak, followed immediately by a precipitous 77 percent decline (more than $111) in just 118 days of trading. It is difficult to explain that unprecedented price volatility by changes in supply and demand fundamentals. Fewer than six months after the December 2008 low of $33.87, oil prices settled north of $72 on June 11, despite adequate supplies and the sharpest year-over-year drop in global consumption in nearly 30 years.
