The Economist (2/21/08) published a review of commodities titled, "Pumped up - Soaring prices for oil and more".  It was an example of commentators blaming speculators. 

Here is an excerpt:

Nonetheless, the prospects for demand must have diminished at least somewhat as the world economy has slowed, and the outlook for supply has not worsened dramatically in the past few months. Hence some other factor must be at play. Many analysts blame speculation. As falling interest rates, tumbling stockmarkets and contracting house prices drive investors out of bonds, equities and property, the argument runs, there is lots of money looking for a new home. And since commodities have produced such lavish returns in recent years, and have weathered the recent turmoil relatively unscathed, they are an alluring option.

Citigroup believes that the recent rise in the oil price “is driven principally by a sharp uptick in fund flows.” Lombard Street Research sees an “iron bubble”. Others worry that America’s fiscal stimulus may cause trouble by inflating demand for commodities. In Citigroup’s cheery phrase, “the collapse of one bubble often sows the seeds of the next.”

Tags: energy investments

This entry was posted on Sunday, February 24th, 2008 at 4:13 pm and is filed under Price of oil. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.