Do Speculators Drive Crude Oil Futures Prices?

The Energy Journal, Vol. 32, No. 2, pp. 167-202, 2011

Posted: 20 Dec 2010  

Bahattin Buyuksahin

Bank of Canada

Jeffrey H. Harris

American University

Date Written: December 20, 2010

Abstract

The coincident rise in crude oil prices and increased number of financial participants in the crude oil futures market from 2000-2008 has led to allegations that “speculators” drive crude oil prices. As crude oil futures peaked at $147/bbl in July 2008, the role of speculators came under heated debate. In this paper, we employ unique data from the U.S. Commodity Futures Trading Commission (CFTC) to test the relation between crude oil prices and the trading positions of various types of traders in the crude oil futures market. We employ Granger Causality tests to analyze lead and lag relations between price and position data at daily and multiple day intervals. We find little evidence that hedge funds and other non-commercial (speculator) position changes Granger-cause price changes; the results instead suggest that price changes precede their position changes.

Suggested Citation

Buyuksahin, Bahattin and Harris, Jeffrey H., Do Speculators Drive Crude Oil Futures Prices? (December 20, 2010). The Energy Journal, Vol. 32, No. 2, pp. 167-202, 2011. Available at SSRN: https://ssrn.com/abstract=1728705

Bahattin Buyuksahin (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Jeffrey H. Harris

American University ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-6669 (Phone)

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