The WSJ reports that there has been a tremendous increase in the number of futures and options contracts by people or organizations that have no need to lock in a price on oil. There's some debate about the effect of speculation on oil prices and Paul Krugman has been skeptical but he tries to look at all the arguments.
Data Raise Questions On Role of Speculators
By ANN DAVIS
August 15, 2008; Page C1
Data emerging on players in the commodities markets show that speculators are a larger piece of the oil market than previously known, a development enlivening an already tense election-year debate about traders' influence.
Last month, the main U.S. regulator of commodities trading, the Commodity Futures Trading Commission, reclassified a large unidentified oil trader as a "noncommercial" speculator.
As a result, the number of futures and options contracts held by traders counted as speculators -- those who don't have a commercial need to mitigate the risks of energy prices in their business -- rose to 49% of all crude-oil bets outstanding on the New York Mercantile Exchange, up from 38%.
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