According to the study, investors poured $60 billion into oil futures markets during the first six months of the year as oil prices soared from $95 to $145 a barrel. Since then, investors have withdrawn $39 billion from those same markets as prices have retreated.Sigh. One of the factors that shift the demand curve is expectations of future prices, a.k.a. speculation. Thus speculation is by definition a change in supply and demand. If they are looking for reasons other than speculation to explain price movements, it is ass-backwards to look at history for reasons why expectations of future prices changed. In fact, that is why they call it a "futures market."
Michael Masters of Masters Capital Management, which did the study, said the flow of money - not major changes in supply and demand - caused the volatile movement of oil prices. The report was released Wednesday by Senate and House sponsors of bills to put additional curbs on oil market speculation.
Wednesday, September 10, 2008
Error in CNN Money on Oil Speculation
Here is a good practical example for your introductory econ class, have them pick out the error presented in this CNN article covering a study given to Congress: