Can speculators really raise the price of oil in the LONG term?

Question

It seems to me based on my basic economics 101 experience, that if the price of oil is pushed higher than where it would normally be supported by worldwide supply and demand, then the artificially high price would cause demand to decline, supply to rise causing a surplus. Speculators would then need to add even more money into oil commodities to account for that surplus and keep the price high. Therefore in order for speculators to keep the price of oil above the "correct" supply and demand price for any extended period of time, they would need to keep adding more and more and more money into oil. Since speculators pots of money isn't endless, supply and demand will eventually catch up and pop the speculative bubble.

Does anyone want to refute my analysis or support it? What do you think we have now (a speculative bubble or a real price increase in supply and demand) ? What is the reason oil has gone down $40/barrel in the last month?

Answer 1

You are correct.  We have seen this happen before. When prices

are artificially high they must eventually fall. When they fall someone

wiil lose money. Dot Coms and Enron are good examples.

Answer 2

Speculators would need a massive amount of money to manipulate the price of oil for a long period. In my opinion, the reason you have prices falling at the moment is demand destruction. Supply has grown only very little. If a glut happens, it will be because of continued demand destruction and economic contraction.  

Answer 3

If enough speculators all do it at the same time and then roll their extra profits ( on the sale of the actual oil at the inflated price) back into more futures contracts it can be propped up artificially as long as all the investors stay pointed in the same direction.

HOWEVER, it price will drop at a speed proportional to the over speculation should a fundamental reason cease to exist, like the war in the middle east.

If a fundamental reason for the speculation dissolves so will all the speculation above it that depends on that fundamental reason.

Example if the true value of oil is $70 a barrel and speculation has oil at $140 a barrel then the price will swiftly collapse back down to $70 a barrel as soon as the war ends or RUMORS that the war will end.

Obama is DROPPING the price of OIL JUST BE BEING AHEAD IN THE POLLS!

Answer 4

No, it's impossible.

The so-called "speculators" always have a non-"speculator" on the other side of the transaction so their power to influence the market is way oversold by the idjuts that think that we're the idiots. The proper term for these folks is facilitator as that's what the folks on the other side of their transactions are using them for -- facilitating trades that might otherwise not occur.