The Relationship of Unregulated Excessive Speculation to Oil Market Price Volatility

This paper presents supplemental views to the Energy Market Volatility portion of the Report by the Expert Group established by the Jeddah and London ad-hoc Energy Meetings (2008) to provide recommendations to the Twelfth International Energy Forum (IEF) Ministerial Meeting in March 2010. Specifically, this paper focuses upon theories articulated in the Report that have been advanced by certain market observers and academics to the effect that changes in crude oil market fundamentals have not been sufficiently dramatic to justify the last two year‘s extreme worldwide crude oil prices. This view sees the oil market (and even certain predominant expectations about that market) as having been seriously distorted by substantial and volatile passive investments — not in crude oil itself — but in deregulated or poorly-regulated crude oil derivatives designed to provide profit only from price changes in the physical market.

Prepared for the International Energy Forum

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