Dollars and Jens
Wednesday, June 25, 2008
Oil Speculators
Paul Krugman says that the futures market for oil doesn't affect the spot market. Arnold Kling says otherwise (and is correct), but I think the first commenter (who defends Krugman) explains it better than he does; if futures prices exceed spot prices by more than the costs of storage, people will bid up the spot price and sell futures.

But according to the EIA, commercial inventories are low. I don't know how exhaustive their sources are, but this is a data point against the theory that speculators are driving up prices.

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