Comments on: Oil Speculation: Correlation or Causation?

By: Naser

Naser — Sat, 11 Jul 2009 05:05:37 +0000

Keynesian09:

I agree with you that there is no practical way of closing down oil speculations, we have to wait and say what the Obama administration proposes.

Oikonomia:

Thank you for the kind words

Hamstrung:

I get your point about the 12 months time frame, however, keep in mind that during this time from oil reached $150 and went down to $30. Markets were very volatile, and I believe volatile markets can magnify results during a shorter time frame.

By: hamstrung

hamstrung — Fri, 10 Jul 2009 08:15:10 +0000

my first instinct is that 12 months does not make for a statistically useful time series in the oil market. why didn’t their analysis (economist?) go farther back? and i concur with the being careful about reading too much into correlation. volatility looks like its here for a while in many key financial markets however.

has seekingalpha chimed in on this report btw?

By: oikonomia

oikonomia — Thu, 09 Jul 2009 21:41:18 +0000

Good piece naser, keep the posts coming

By: keynesian09

keynesian09 — Thu, 09 Jul 2009 19:11:42 +0000

I don’t think there is a practical way of closing down on oil speculators. The question is if they can cause a price shock in the oil market. I still believe there is causation. I remember last year a major oil startegist came to our offices and unveiled the most sought after chart: “Average Daily Trading Volume of Key Energy Futures & World Oil Demand. It showed the follow:

1. In 97: Trading was 3.3 times world oil demand
2. In 02: Trading was 4.5 times world oil demand
3. In 07: Trading was 12.7 times world oil demand
4. In 08 (until Oct): Trading was 15.1 times world oil demand

Not only do I believe there is correlation, but also causation.