Oil prices were driven up by speculation

As oil prices plummet, a part of the story of their rise emerges. According to the Wall Street Journal,

Companies varying from refiners to private-equity firms may have an incentive to store real barrels of oil, but few have the money to do so these days. Ever since parts of the financial sector collapsed in September, banks have restricted lending, and the cost of borrowing has risen. The added financing expense is keeping buyers out of the physical market, which in turn has added downward momentum to near-month oil prices.

So speculators have been purchasing oil on credit, and hoarding it to sell at higher prices. Now that this credit is no longer available, they can no longer purchase it to hoard.

Author: benfell

David Benfell holds a Ph.D. in Human Science from Saybrook University. He earned a M.A. in Speech Communication from CSU East Bay in 2009 and has studied at California Institute of Integral Studies. He is an anarchist, a vegetarian ecofeminist, a naturist, and a Taoist.

Leave a Reply