The Simple Economics of Commodity Price Speculation
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The price of crude oil never exceeded $40 per barrel until mid-2004. By July 2008 it peaked at $145 and by late 2008 it fell to $30 before increasing to $110 in 2011. Are speculators partly to blame for these price changes? Using a simple model of supply and demand in the cash and storage markets, we determine whether speculation is consistent with data on production, inventory changes, and convenience yields. We focus on crude oil, but our approach can be applied to other commodities. We show speculation had little, if any, effect on oil prices. (JEL G13, G18, G23, G31, Q35, Q38)
Date issued
2016-04Department
Sloan School of ManagementJournal
American Economic Journal Macroeconomics
Publisher
American Economic Association
Citation
Knittel, Christopher R. and Pindyck, Robert S. “The Simple Economics of Commodity Price Speculation.” American Economic Journal: Macroeconomics 8, no. 2 (April 2016): 85–110. © 2016 American Economic Association
Version: Final published version
ISSN
1945-7707
1945-7715