$100 Oil and the "S" Word

Is it growing demand and tight supply, or merely rampant speculation that has pushed crude to record highs?
from CNNMoney.com:
By Steve Hargreaves, CNNMoney.com staff writer November 27 2007: 2:35 PM EST

NEW YORK (CNNMoney.com) -- Greed is driving oil prices to $100 a barrel.

That's a common feeling among the general public, which sees record profits for investment banks that bet on oil prices - making wealthy oil companies even wealthier - while drivers shell out $3 and more for a gallon of gas.

It's also a common refrain from OPEC states. Having to defend themselves against charges their production quotas are responsible for the high prices, they point to near-average crude oil supplies and say speculation is what's behind the frenzy.

But industry experts offer mixed opinions on speculative investment's impact on oil prices. Some say it's marginal, that strong demand and limited supply are the real reasons oil prices have risen five-fold since 2002, and say additional investors actually benefit the market by adding more liquidity.

Others say the tight supply and demand situation has been known for a while, and nothing but speculation is behind the doubling of oil prices over the last year. They say there is a cost to the sheer number of oil contracts now traded on the oil exchanges, and this trading has just enriched Wall Streeters at the expense of average Americans.

Read More>>