America's Petro-Terrorists: How Speculators Drove Up Oil Prices (3,721 words)

[Sirveri]

4. This can only work when supplies are tight.

Oil supplies will always be tight in the modern age however, so that's a moot point.

However watching the month to month consumption/production rates at the time (as I was very interested in peak oil) I saw the 2008 spike show up as consumption exceeded demand by a very small amount, causing the price to spike until demand was destroyed since no further supply could be expanded, even the Saudi's were tapping their reserves to dump into the markets. And why not, 200$/bbl when you get it out of the ground for 50 cents. Pure profit.

But, when supply and demand is tight, then it doesn't take much money to buy up the slack, that where the speculative bubbles come from, and when I was talking about demand, that's considered demand. What was funny was the price drop afterwards that shuttered expansion projects, guaranteeing we will see this again and again.