Oil Price Futures

The price of oil has continued to relentlessly increase. However, a good question to ask is - how much is this due to economic fundamentals and how much is it due to speculation?

In a way the two issues are closely related. There is rising demand for oil, especially because of the breakneck rates of growth in China and South East Asia. This rise in demand is dwarfing the slower growth from Western economies.

Supply is not falling; but, it is struggling to keep up with the rise in demand.

However, because of the rising price of oil, it is encouraging people to buy oil futures, therefore, the price is being pushed higher by speculators who are banking on oil prices rising. Even though there are sound reasons for the price of oil to go up, it is quite possible prices will rise by more than they should do creating a speculative bubble