Are speculators driving up oil prices?

Some claim that speculators are driving up oil prices artificially. For this latest price increase, however, it seems like speculation has actually been holding down oil prices.

Joshua Lott/Reuters/File
A motorist pumps fuel into his vehicle at JJ's Express Gas Plus station in Phoenix gas station in Phoenix, Arizona . Oil prices have spiked, but it isn't due to speculation, the author argues.

It is often claimed that speculators are driving up oil prices artificially. That is a possible scenario, yet it wasn't applicable to for example the recent run-up in oil prices. For speculators to drive down oil prices paid by final users they must stock oil in physical inventories, something which they haven't done. Indeed, if you look at the numbers from the Energy Information Administration , it seems that speculation has been holding down prices. Crude oil and gasoline inventories are down by about 5.5% the latest year, while inventories of distillates (like diesel) and propane are down more than 10%.

09/16/11 Week Year
Crude Oil 339.0 -7.3 -19.3
Gasoline 214.1 3.3 -12.0
Distillate 157.6 -0.9 -17.2
Propane 55.359 0.614 -8.361

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