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Speculative pursuit? Or a fundamentally-driven surge to bring potential future demand, with soaring consumption in the developing world, in line with potential future supply?

James Hamilton at Econbrowser acknowledges that the flow of funds into commodity investing has contributed to oil prices highs. But he comes out on the latter side. If the rate of growth in Chinese petroleum consumption were to continue, the country would by 2020 be using about the same per day as the US is now. By 2030, it would be up to double the current US consumption. He adds:

But I cannot imagine that the projected path for China above will ever become a reality. Oil prices have to rise to whatever value it takes to prevent that from happening.

The notion of sky-high oil prices looks in danger of becoming a self-fulfilling prophesy. Global analysts are upping their forecasts to north of the ton mark - Credit Suisse has just moved its price forecast for this year from $91 a barrel to $120. Its long term forecast went from $75 to $100. They estimate that each 10 per cent hike in the oil price takes about 0.1 to 0.2 per cent off GDP for developed markets.

As 2016 oil futures rocket to almost $140 a barrel, Yves Smith is sceptical, asking why any mention of Iraq, and the impact of deteriorating security on output, seems peculiarly absent from discussions.

When analysts are considering the impact of production in Brazil, the use of very heavy (read nasty) crude from Venezuela and Iran, and even upon occasion Canada’s tar sands, the absence of Iraq from mention seems a considerable, peculiar omission.

On supply, Credit Suisse notes that with OPEC pointing to speculation as lying behind $30 of the rising price of oil, the member countries are unlikely to be using a $120 a barrel price to budget. That suggests an increasingly limited offset to global GDP growth from the oil exporting nations.

Elsewhere, a faith in the ability of one-man proclamations to move markets is developing. The New York Times reports that Arjun Murti is being dubbed the oil market’s Cassandra, attracting attention by issuing one sensational forecast after another.

Experts disagree over the supply of oil, the demand for it and whether recent speculation in the commodities markets has artificially raised prices….. Whatever the case, oil analysts like Mr. Murti have suddenly taken on the aura that enveloped technology analysts in the 1990s.

And let’s not forget T Boone Pickens. Says Bloomberg:

Oil Rises to a Record After Pickens Says Prices May Reach $150

Haven’t the billionaire investor’s predictions always been one step ahead of the oil price on the way up? Birinyi Associates, via TickerSense, provides the graph, of Mr Pickens’ comments on oil’s ascent.

But what we want to know what the oil man was saying on the way down.

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Related links
Shortage fears push oil price futures near $140 - FT.com
Short View: commodity speculation - FT.com
Oil cost inflation - Lex (premium subscription required)