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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)
Knittel et al. (Thu,) studied this question.