Speculation is inherently under-researched, as opposed to investment, which is a decision made based on research that will return a profit. The main reason that oil prices have shot up over the past few years is that speculators assume that, due to military conflict, reducing oil supply, and other factors, oil prices will go up, so that investors will place their money on oil stocks. In turn, the price goes up in order to match the speculators' assumptions. The average citizen pays the price for this speculation at the gas tank.
Oh my, what a topic. Isn't it hilarious that any time a holiday is near, how oil prices seem to inch forward? I wonder why that is. Prices seem to go up, even way before the demand is even there. It's funny how that even works. You would think that our government would do something to protect their citizens. But oh, wait. I forgot, they're on vacation too. My bad.
If we had good relationships with the countries that supply our oil, it would be more likely that we could come to terms on the price of oil. If we could do something for the countries that supply our oil (considering how important their oil is to us) then I believe the price of oil would be lower and not fluctuate as much.
Restricting oil speculation would do nothing. As a culture, we are swinging between our great need for oil and our fear that we are going to run out of it before coming up with viable alternatives. Additionally, some oil producing countries are unstable and there are issues surrounding deep water drilling, not to mention the alternative technologies. There are far too many factors involved in oil prices to blame any given one.
Unrestricted speculation is what's really responsible for the wild swings in oil prices because the impression of demand drives up barrel prices. Speculators have been reportedly buying oil futures at a feverish pace. Because the oil market is no longer regulated, speculators can trade as much oil futures as they want and there is no way to know how much this trading is happening.
Oil prices seem volatile lately. Since they affect many other prices and things in our lives, people take note of this. For some reason (possibly because they're an easy to understand scapegoat that is not in our social group) we blame people speculating on the future price of oil. Although the weight of evidence done be economic researchers seems to suggest that speculators are not to blame, the idea that bets on the future price of oil are solely to blame for fluctuations is absolutely ludicrous on its face. It seems to ignore the uncertain nature of oil extraction, the political instability of the main sources of oil, and the constant meddling with prices, imports, and exports by almost every government in the world. These certainly have a much larger combined impact than simple speculation.
Unrestricted speculation might add a little upward pressure to the price of petroleum, but nowhere near as much as the fact that more people want to drive more miles every year. Everyone expects politicians to lower gas prices but refuse themselves to get better mileage vehicles or just drive less.
Petroleum is a commodity that has a worldwide market. The price of gasoline in the United States is affected by the amount of oil that China and India use. Futures traders that try to price oil for the next few months look at estimates for demand and estimates for supply. The futures transactions actually help smooth out price swings. The major factor in price changes is caused by demand changes and supply changes.
While unrestricted speculation is certainly a factor in the changing price of oil, it is not the only factor, and probably not even the largest factor. The continuing unrest in the Middle East, which is the main source of our oil, is certainly a large factor. The general state of the world economy is another. Certainly, the major gas companies, like BP, have a lot of control over the prices at the pump, as evidenced by the huge profits they are posting during recession times. I theorize that this also affects the price of crude oil, since suppliers will charge whatever the market will bear, and gas companies have taught us to bear high prices.
I believe the price for oil has gone up due to the fight over it, the war in Iraq, the burning of gas in protest, and the always present fear that we're at the end of our oil reserve. I think scare tactics, along with the war, are the main causes.
Supply and demand is the key factor in determining the price of all commodities. While speculation plays a role in pricing, it is just one of many factors. Contrary to popular belief, there are restrictions on speculation in oil. Margin requirements act to limit speculation. Furthermore, price swings in oil can hardly be construed as wild. A one dollar change in the price of a barrel of oil at today's prices is merely a one percent move. It is curious that unrestricted speculation is always blamed when oil prices are going up, but rarely cited when oil prices are going down. A downward move in the price of oil is a sure sign those same speculators overplayed their hands and are being punished severely for that transgression.
The growing debt of the United States has created an unstable dollar and massive inflation. This instability a decreased dollar has caused oil prices to wildly fluctuate, primarily because the dollar (for the time being) serves as the reserve currency of the world. Thus all oil is sold in dollars. The American way of consume and not produce is one of the many factors of the dollar being debased. Couple that with the Federal Reserve raping of the American people you have a recipe for disaster.
Governments and media always blame speculators for every rise in the price of oil. There is speculation in not only in oil, but also in every commodity. Blaming them will not solve the problems. I think the price of oil is going up due to quantitative easing by the Federal Reserve and also large budget deficit that is weakening the dollar. A weal dollar means more money to purchase the same goods that it would have normally bought during a period of strong dollar.
If oil buyers and oil sellers could agree on a price, there would be no speculation at all. There's no such thing as "unrestricted" speculation: ultimately, there must be an oil seller and an oil buyer. Speculation increases market liquidity, which leads to fairer prices.
Oil prices have been on the rise since the war in Iraq. Experts agree that we've reached "peak oil"- a point where the extraction of oil will lessen and the price of extraction will go up. Americans are using more barrels of oil per day than ever before, and although in the summer prices have been unstable because of the speculation of cost, these were a few isolated incidents and are not indicative of the greater trend of rising oil prices in the last ten years.