However, lack of production/inventory does not seem to be sourcing the rise in prices, as Alan Greenspan stated repeatedly, its oil speculation. For a historical look over the past decade, see the article What Is Driving Oil Prices? by Richard G. Anderson and Jason J. Buol on the Federal Reserve Bank of St. Louis' website, from January 2005 ... there's a nice graphic (from 2004) showing historical spot and future prices for oil. BusinessWeek from November 26, 2007 (A Hot Hand in Oil Speculation) references a Goldman Sachs analyst - Jeffrey Currie - who should be listened to, given his remarkable run at predictions in the oil market. Keith Fitz-Gerald reports on MondayMorning (Jan 10, 2008, Investors Will Benefit From New Plan to Have the United States and China Cooperate in Curbing Oil Speculation) about the future cooperation of the US and China on oil speculation.
Oil speculation is delved into by David Usher on TheReaganWing (June 10, 2007, Oil Price Gouging: From Enron With Love):
...Savvy investment firms and avaricious lawyers analyzed the Enron case – realizing they could turn a huge buck on oil futures – so long as they tacitly let oil companies constrain the oil supply without manipulating the supply directly themselves.
Giant speculative investment funds and oil companies now make tremendous profits raiding the oil spot-market, playing seemingly separate but implicitly cooperative roles serving up the same end-effect as Enron wreaked on California. But this time, the victim is the American consumer, not energy producers and distributors.
Federal and state politicians in both parties have failed to address this “Enroning of America” because government is on the take too. Taxes rise with gasoline prices, fattening political contributions while feeding slush budgets and pork barrels at both the state and federal levels....
...: “Investment banks from Morgan Stanley to Goldman Sachs are making so much money from oil futures that they’ve become a hot investment for all sorts of big-money players.” Ben Dell, an oil analyst and Sanford Bernstein calls it correctly, if not conservatively: “pension funds and other investors are buying oil to remove it from the market — which can help drive up demand — before selling it for a profit some months later”....
...Here is what we can take away from the above information:
(1) U.S. oil companies cut back U.S. distillation capacity substantially between 1980 and 2004. This seeded fears. Spot market prices rose tremendously, thus increasing profits to oil companies.
(2) U.S. oil companies decreased stateside production 40.3% between 1980 and 2004, driving fears about dependence on foreign oil, and creating an illusion that shortages were imminent.
(3) These two items, in conjunction with speculative manipulation of the spot market by banks and pension funds, caused oil company profits to soar. The world’s three largest oil companies netted profits of $172,000 per minute during the second quarter of 2006. Profits going forward look similarly bullish.(22) ....
...This problem is not limited to oil markets. In the name of “deregulation”, investors are now raiding electricity markets nationwide. This is driving up home energy costs for everyone, causing utility companies to defer lifecycle replacement of end-of-life equipment, resulting in massive power outages caused by wet or cold weather failures of antiquated step-down equipment never before experienced by customers....
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