Pinning the blame for crude's dramatic price jump

So, was it the speculators driving up the price of crude over the last year, or some other factor at play?

The Organisation of Petroleum Exporting Countries (Opec), analysts and the media have all pegged speculative investors as one of the driving forces behind oil's meteoric rise.

Now that the US Commodity Futures Trading Commission has finally issued the report from their investigation into speculative oil trading, the decisive answer seems to be -we aren't sure.

Breaking it down to the absolute basics, the commission's report says that because the available data does not differentiate between speculative and legitimate hedge trading activities.

It took them a whole investigation to figure that out?

What we are left with is a case of duelling reports from a whole cast of political and industry players.

Opec stands by its earlier assertion that speculative investors were behind the price rise, and so there was no reason to release more crude into the market.

In the same ideological boat are a raft of US politicians, who are touting a private consultant's report which says that investors dumped $60 billion into oil market futures during the first five months of this year.

Somewhere in the middle is the remainder of the commission's report, which indicates that there was a decline in the type of trades that could be considered speculative even as oil prices were peaking during the first six months of 2008.

Passing the buck

Then there are the relatively few who equate the much-maligned speculators with the never-proven gunman on the grassy knoll at the John F. Kennedy assassination.

"The politicians wanted a fall guy for rising prices," read one Wall Street Journal editorial. Well isn't this all extremely unhelpful?

I still maintain, as I have in past columns, that there is probably a relationship between speculative investment and the price of oil.

I doubt it is the entire picture, but with at least one major report coming in as ambiguous at best, I think it would be premature to dismiss the idea altogether.

I have to say, I think the best thing that came out of the commission's report was the suggestion that they start tracking investment data differently. We're always going to be better of with more, rather than less, information about how and why people, or organisations, are investing.

Opec production

But I can't say that Opec's recent noise about cutting production now that - gasp - oil has dropped back towards the $100 per barrel mark, even though that was once thought of as being unimaginably high.

The sentiment certainly doesn't entirely dovetail with their strenuous assertions that speculators were the evildoers behind the dramatic price jump.

After all, 18 months ago most analysts maintained that $100 per barrel oil was a price ceiling that was years and years away.

Now that prices have dropped from its rather concerning highs, it would be in Opec's best financial interest to keep the price of crude moderately high now that consumers are used to steep energy costs.

After all, any price drop from its high of more than $145 in July is going to seem like relief even if it is far above the level predicted over the last few years.

But it is a risky gamble.

A fair number of analysts predict that consumers are now so nervous about pump prices and heating costs that even oil's lower price won't be enough to reinvigorate a slowing world economy.

The writer is a freelance journalist based in Alaska, USA.