Black Gold & Fool’s Gold: Speculation in the Oil Futures Market
CEEPR Working Paper No. 09-013
46 Pages Posted: 27 Sep 2009
Date Written: September 14, 2009
This paper addresses the question of whether the oil price spike of 2003-2008 was a bubble. We document and discuss what is known about the level of speculation in the paper oil market. We then analyze the dynamics of the term structure of futures prices, both during the earlier period of 1985-2002 and during the spike. The dynamics of the term structure changed in important ways during this latter period, and we explain how this may have contributed to generating a bubble. We also explain how this answers the puzzle of the lack of accumulating above-ground inventories. Finally, we discuss the implications for regulatory reform of the paper oil markets.
Keywords: oil, futures, speculation, bubble
JEL Classification: G13, G15, G18, E44, Q43
Suggested Citation: Suggested Citation