Ali Aissaoui

How Elastic Is the World's Oil Supply?

"Fundamentals or Speculation? A Critical Review of CFTC’S Interagency Task Force ‎Report on Crude Oil Markets"

In defying conventional expectations, crude oil markets and ‎‎prices have puzzled and polarized oil analysts, ‎economists and ‎‎policy advisors alike. As the controversy has stimulated further ‎‎research, valuable papers have ‎recently been produced that ‎‎deserve our attention and appreciation. CFTC’s interagency task ‎force report ‎is no less ‎worthy of interest. The authors have shared ‎rare professional ‎skills and insights that will greatly ‎enhance our ‎understanding ‎of ‎structurally changing and volatile markets. ‎

Obviously, it is not the intention of our review to ‎weigh for or against ITF’s assertion that ‎speculation has not ‎systematically driven changes in oil prices. The review, however, ‎highlights ‎significant ‎omissions and ambiguities, which do ‎not appear to stem from the report’s interim nature only. The ‎‎most obvious are the effects of ‎US policy-related factors on ‎market fundamentals, the ‎implications of futures ‎market ‎backwardation for both low ‎inventory levels and soaring ‎speculation, and the absence of ‎explicit ‎affirmation or negation of ‎a speculative bubble. As work continues, CFTC and the interagency ‎task force should ‎broaden their analysis and target a wider ‎audience in order to validate and legitimize their conclusions.‎

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