The Role Of Oil Speculation On The Economy: The Problem With The View Of Fattouth, Kilian, And Mahadeva

Abstract

On July 30, 2012, Fattouth, Kilian, and Mahadeva published and online paper titled, The Role of Oil Speculation in Oil Markets: What Have We Learned So Far? They concluded that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. This paper aims to show that the conclusion of their paper, which challenges the finding of direct correlation between oil speculation and rising spot oil prices in Ajuzie et al. (published in 2009) is fraught with omissions that have led to mistaken conclusions. In their literature review, they failed to include opposing findings, even when those views are in public domain. Because of the enormous negative consequences that will result from misapplication of economic policies based on such mistaken conclusions, it is important to address the error in their finding.