The Simple Economics of Commodity Price Speculation

Christopher Knittel and Robert Pindyck

American Economic Journal: Macroeconomics, 2016, vol. 8, issue 2, 85-110

Abstract: 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)

JEL-codes: G13 G18 G23 G31 Q35 Q38 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mac.20140033
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Citations: View citations in EconPapers (81)

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Working Paper: The Simple Economics of Commodity Price Speculation (2013)
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