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Do Speculators Drive Crude Oil Futures Prices?

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  • Bahattin BüyükÅŸahin
  • Jeffrey H. Harris

Abstract

The coincident rise in crude oil prices and increased number of financial participants in the crude oil futures market from 2000-2008 has led to allegations that “speculators†drive crude oil prices. As crude oil futures peaked at $147/bbl in July 2008, the role of speculators came under heated debate. In this paper, we employ unique data from the U.S. Commodity Futures Trading Commission (CFTC) to test the relation between crude oil prices and the trading positions of various types of traders in the crude oil futures market. We employ Granger Causality tests to analyze lead and lag relations between price and position data at daily and multiple day intervals. We find little evidence that hedge funds and other non-commercial (speculator) position changes Granger-cause price changes; the results instead suggest that price changes precede their position changes.

Suggested Citation

  • Bahattin BüyükÅŸahin & Jeffrey H. Harris, 2011. "Do Speculators Drive Crude Oil Futures Prices?," The Energy Journal, , vol. 32(2), pages 167-202, April.
    • Handle: RePEc:sae:enejou:v:32:y:2011:i:2:p:167-202
    DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No2-7
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    References listed on IDEAS

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    1. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-164, Summer.
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    Cited by:

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    5. Sanders, Dwight R. & Irwin, Scott H., 2015. "Bubbles, Froth, and Facts: What Evidence is there to Support the Masters Hypothesis?," 2015 Conference, April 20-21, 2015, St. Louis, Missouri 285837, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
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    9. Yan, Lei & Irwin, Scott H., 2016. "Identifying the Impact of Financialization on Commodity Futures Prices," 2016 Conference, April 18-19, 2016, St. Louis, Missouri 285846, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    10. Sanders, Dwight R. & Irwin, Scott H., 2014. "The ‘Necessity’ of New Position Limits in Agricultural Futures Markets:," 2014 Conference, April 21-22, 2014, St. Louis, Missouri 285813, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    11. Yao, Wei, 2025. "The US Quantitative Easing Monetary Policy and Commodities’ Prices," Other publications TiSEM 185d14d3-9dc2-4276-82ec-e, Tilburg University, School of Economics and Management.
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