Summary
There is a serious effort on all parties, governments, producers, or consumers to shift the blame of high oil prices elsewhere. However, I believe that the oil price rise is a combination of both these factors. If we could solve the issues around inventories and money flows an answer might appear.
Analysis
The great debate rages on. Is it financials, ie speculators or investors, or is it supply and demand fundamentals that are driving the market. I think both, but have the following observations:
Its the speculators: The stock market capitalization in the USA is something over 15 trillion dollars. I understand it is closer to 30 trillion. The total value of crude oil, gasoline and heating oil contracts on the NYMEX is around $250 billion. I got this figure by multiplying the total open interest of each commodity by its contract value. This overstates the total amount invested due to the leverage afforded by margin, but nonetheles puts total value in perspective. So the futures "market cap" represents less than 2% of the USA stock market cap. Seems like a small amount of money outflow from equities into the oil futures market can make a big difference.
Its the fundamentals: If we have plenty of supply while demand stagnates or is decreasing, then we should see worldwide increases in the total amount of crude oil plus petroleum product inventory. However, it's difficult to come up with this data on a timely basis. We have it weekly in the USA where crude oil inventories have declined, gasoline inventories stabilized and distillate inventories increased over the last few months. In the OECD, inventories are reported once per month and they are so historical by the time they appear as to be difficult to trade on. In many parts of Asia, Africa and Latin America, inventory reports are almost non existent. Therefore its almost anybody's guess as to whether today's worldwide supply is greater than or less than demand at this given moment.
Interestingly, the NYMEX futures market for the first two months is in contango for gasoline, heating oil and crude oil. Ironic with prices at record levels.
