Capital Spectator has a good blog post about oil prices and
investors speculators. It includes the following chart:
Capital Spectator quotes a Sanford Bernstein report: "Before 2002, you could project the commodity’s fate by estimating the outlook for spare capacity and inventories — but now you also need to figure out the timing and amount of funds flowing into commodity futures."
CapS thinks that long-term, oil prices are headed up. We disagree there. But we agree that short-run fluctuations can now be strongly driven by speculative fevers.
Business Strategy Implications: Look for greater volatility of oil prices. Investor movements can dominate fundamentals for maybe a year, and maybe more than $10 per barrel of price movement.