The Role of Speculation in the Determination of Energy Prices
This paper seeks to evaluate the role of speculation in the determination of global energy prices. Designed as a case study, five major oil producing countries are the focus of this positivistic study: Nigeria, Mexico, Iran, Saudi Arabia and Russia. Data is collected through secondary sources. One-tailed and two-tailed tests carried out on the relationship between speculation and oil prices for each of the five countries yield critical values lower than the alpha. Thus, the null hypothesis is rejected in favor of the alternate hypothesis that ‘there is a significant and positive correlation between commodity derivatives (oil futures) and oil prices’. The study found that while there is a positive relationship between speculation in the commodity derivatives market and oil prices, such a relationship is at best weak and attributes the high prices to several factors, including political instability, high and rising demand from overheating economies such as China, and falling production levels, among others. The paper emphasized the need to enhance the physical and financial transparency of the energy market, as well as the operation of the supply and demand fundamentals, including regulating against insider trading and market manipulation practices, strengthening the reporting requirements of the dealers in the market, and strengthening capital adequacy and margin requirements.
Volume (Year): 2 (2012)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.econjournals.com|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Denis Gromb & Dimitri Vayanos, 2010.
"Limits of Arbitrage: The State of the Theory,"
NBER Working Papers
15821, National Bureau of Economic Research, Inc.
- Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
- Peter C. B. Phillips & Jun Yu, 2010.
"Dating the Timeline of Financial Bubbles during the Subprime Crisis,"
Cowles Foundation Discussion Papers
1770, Cowles Foundation for Research in Economics, Yale University.
- Peter C. B. Phillips & Jun Yu, 2011. "Dating the timeline of financial bubbles during the subprime crisis," Quantitative Economics, Econometric Society, vol. 2(3), pages 455-491, November.
- Peter C. B. Phillips & Jun Yu, 2009. "Dating the Timeline of Financial Bubbles During the Subprime Crisis," Finance Working Papers 23051, East Asian Bureau of Economic Research.
- Peter C. B. Phillips & Jun Yu, 2009. "Dating the Timeline of Financial Bubbles During the Subprime Crisis," Working Papers 18-2009, Singapore Management University, School of Economics.
- Denis Gromb & Dimitri Vayanos, 2010. "Limits of Arbitrage," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 251-275, December.
- Bryan R. Routledge & Duane J. Seppi & Chester S. Spatt, 2000.
"Equilibrium Forward Curves for Commodities,"
Journal of Finance,
American Finance Association, vol. 55(3), pages 1297-1338, 06.
- Bryan Routledge & Duane Seppi & Chester Spatt, . "Equilibrium Forward Curves for Commodities," GSIA Working Papers 1997-50, Carnegie Mellon University, Tepper School of Business.
- Bryan Routledge & Duane Seppi & Chester Spatt, . "Equilibrium Forward Curves for Commodities," GSIA Working Papers 1997-49, Carnegie Mellon University, Tepper School of Business.
- Sushil Bikhchandani & Sunil Sharma, 2001. "Herd Behavior in Financial Markets," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 1.
- Fan, Ying & Xu, Jin-Hua, 2011. "What has driven oil prices since 2000? A structural change perspective," Energy Economics, Elsevier, vol. 33(6), pages 1082-1094.
- Cunado, Juncal & Perez de Gracia, Fernando, 2003.
"Do oil price shocks matter? Evidence for some European countries,"
Elsevier, vol. 25(2), pages 137-154, March.
- Juncal Cuñado & Fernando Pérez de Gracia, 2001. "Do oil price shocks matter? Evidence for some European countries," Working Papers 01-02, Asociación Española de Economía y Finanzas Internacionales.
- Juncal Cuñado & Fernando Pérez de Gracia, . "Do Oil Price Shocks Matter? Evidence For Some Europesan Countries," Working Papers on International Economics and Finance 01-02, FEDEA.
- Kilian, Lutz, 2006.
"Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market,"
CEPR Discussion Papers
5994, C.E.P.R. Discussion Papers.
- Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-69, June.
- Peter C.B.Phillips & Jun Yu, 2009. "Dating the Timeline of Financial Bubbles During the Subprime Crisis," Working Papers CoFie-07-2009, .
- Scott H. Irwin & Dwight R. Sanders, 2011. "Index Funds, Financialization, and Commodity Futures Markets," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 1-31.
When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2012-04-7. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilhan Ozturk)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.