Oil experts divided on main reason for price hikes

Speculation, many analysts note, is a loaded term. It conjures images of unprincipled middlemen who manipulate and bet on prices. In reality, "speculators" are simply investors who have no commercial use for oil and never plan to take delivery. They can include state pension funds and college endowments, as well as investment banks and hedge funds seeking to use oil futures the same way they use other financial instruments.

" 'Speculation' isn't a dirty word," Chilton wrote in an e-mail. "Speculators are a necessary part of futures markets, and they play a critical and important role in the price discovery process. If, however, a group of entities is affecting the price of a critically important commodity in an uneconomic fashion, the CFTC has a responsibility to investigate and address it."

Some oil experts, economists and analysts said supply and demand have been bigger factors than speculation in driving oil prices. And they expect costs to keep going up.

"We continue to gain confidence that the trough in the oil cycle has passed and a new upturn is underway," Goldman Sachs oil analyst Arjun Murti wrote in a report last month.

He cited stagnant world oil supplies -- and declining production outside the Organization of the Petroleum Exporting Countries -- along with a gradual rise in demand. Goldman Sachs boosted its price forecasts by $10 a barrel, saying the cost would surpass $100 over the next couple of years.

Adam Sieminski, chief energy economist for Deutsche Bank, asked, "How long can a commodity stay below its replacement cost?" He estimated that the cost of finding a new barrel of oil is "at least $60 and might be $80."

Chilton -- like others who see a bubble in oil prices -- notes the wave of money coming into oil markets from investors. Last year, the commodities commission estimates, about $200 billion flowed into regulated oil markets.

He said billions of dollars more probably flowed into unregulated, or "dark," markets, where it is impossible to identify players or track trade volumes. Investment banks say money has been flowing into oil funds.

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Mufson writes for the Washington Post.