| | The media, even Wall Street people, are talking a lot lately about that amount of the price of oil that is accounted for by “speculation.” What are they talking about?
It usually goes like this, “There are no supply disruptions, no actual problem. It’s fears about growing unrest in the Middle East that are fueling speculative increases in the price of oil.”
They say this as though no increase in the likelihood of disruptions has occurred and therefore the price shouldn’t have gone up and has gone up only because of those “speculators.” Yet, there really *has been* an increase in the likelihood of disruptions, so the price *should* go up. Increased buying activity in a market is precisely how changes in real-world circumstances get translated into appropriate prices.
So what are they talking about, what am I missing? I hope some economic experts can explain it to me or confirm my suspicion that they are talking nonsense.
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