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Roach: I'm willing to look at data that suggests otherwise, but at the moment I really don't think that speculation is a primary factor in high oil prices.
You're talking about speculation in futures markets, but there is no intrinsic or necessary connection between futures and spot prices. Of course futures can have a significant impact - expectation of higher prices leads producers to hold off on selling, creating a short-term supply gap that is filled by higher spot prices than are justified by market fundamentals. BUT, opec countries have not cut back production, and I have seen no evidence that significant hoarding is happening anywhere in the supply chain - that is, there is so far no credible data indicating a rapid increase in oil inventories (although this is a difficult thing to tally and is not well-documented on a global scale). On the contrary, inventories so far as we can tell are at or near all-time lows. Krugman has talked about this in a number of recent columns.
This is one reason a bubble should be more visible in oil than it was in housing. It is very difficult to read the housing data and understand to what degree house purchases are driven by 'speculation' - consumers buying houses they can barely afford in the expectation that rising prices will leave them better off when they sell in a number of years - because it's not clear whether the home is an investment or, well, just a home. Those aren't even neat categories. In the meantime, you have large numbers of people living in homes that in their minds they intend to eventually sell [at profit], but these people's houses are obviously not counted as 'inventory' in the official numbers.
But in the case of oil, in the absence of excess inventory or reduced production, the story about demand seems to be the only one that makes sense with regard to the current rise in prices.
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