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Black Gold & Fool´s Gold: Speculation in the Oil Futures Market

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  • John Parsons

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    Abstract

    This paper addresses the question of whether the oil price spike of 2003-2008 was a bubble. We document and discuss what is known about the level of speculation in the paper oil market. We then analyze the dynamics of the term structure of futures prices, both during the earlier period of 1985-2002 and during the spike. The dynamics of the term structure changed in important ways during this latter period, and we explain how this may have contributed to generating a bubble. We also explain how this answers the puzzle of the lack of accumulating above-ground inventories. Finally, we discuss the implications for regulatory reform of the paper oil markets.

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    File URL: http://www.brookings.edu/press/Journals/2010/economiaspring2010.aspx
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    Bibliographic Info

    Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

    Volume (Year): (2010)
    Issue (Month): ()
    Pages:

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    Handle: RePEc:col:000425:008582

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    Keywords: oil; futures; speculation; bubble;

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    Cited by:
    1. Chiou-Wei, Song-Zan & Linn, Scott C. & Zhu, Zhen, 2014. "The response of U.S. natural gas futures and spot prices to storage change surprises: Fundamental information and the effect of escalating physical gas production," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 156-173.

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