The New York Times really doesn’t want to mention speculation in this story about oil prices plunging today, but the first analyst they cite gives the game away:
After four months of surging higher, oil prices plummeted by almost 9 percent on Thursday as traders worried that American drivers were beginning to balk at paying nearly $4 a gallon of gasoline.
Energy specialists had a variety of explanations for the drop, including Thursday’s weak employment data and a strengthening dollar that tends to make all dollar-denominated commodities cheaper in dollars and more expensive for holders of other currencies.
“Pop goes the bubble,” said Michael Lynch, president of Strategic Energy and Economic Research, a consultancy firm. “It seems unlikely you will see any tightening in the market in the coming months. The worst of the political threats have past us.”
The word “speculation” never appears in the article. The closest they get is calling it a “price correction.” And a separate analyst says, “The fundamentals have not been strong enough to justify these levels.” So I think we can surmise. The oil bubble was getting too big to be sustainable, affecting the broader economy in a variety of ways. So the speculators ran for cover.
Remember that Ben Bernanke never mentioned speculation in his press conference as a cause of high gas prices. Now prices for crude have plummeted 12% in four days. Commodities across the board are lower, too.
The President actually did put together a task force to monitor speculation and fraud in the oil markets. And some Senate Democrats have made noise on this as well. Perhaps they spooked the speculators. Now if we can just get some position limits in place we won’t have this kind of turmoil again.
To get up to speed on oil market speculation, read this story from Zach Carter and Ryan Grim.