Oil Prices and Specutlators

Capital Spectator has a good blog post about oil prices and investors speculators.  It includes the following chart:

Capital Spectator quotes a Sanford Bernstein report: "Before 2002, you could project the commodity’s fate by estimating the outlook for spare capacity and inventories — but now you also need to figure out the timing and amount of funds flowing into commodity futures."

CapS thinks that long-term, oil prices are headed up.  We disagree there.  But we agree that short-run fluctuations can now be strongly driven by speculative fevers.

Business Strategy Implications:  Look for greater volatility of oil prices.  Investor movements can dominate fundamentals for maybe a year, and maybe more than $10 per barrel of price movement.