This post from last week noted the seeming contradiction between rising oil prices at a time of rising inventories and the current longstanding “contango” in the oil trading market — i.e., futures contracts for a given product are priced substantially higher than that same product for near-term delivery.
In this post, Clear Thinkers favorite James Hamilton takes a stab at explaining the situation, and casts doubt on the conventional wisdom that speculation is a separate force from supply and demand in affecting the price of oil. In so doing, Professor Hamilton makes the following common-sense observation, which you will never hear from politicians and a mainstream media that prefer to characterize business interests that make money speculating on oil prices as greedy capitalists:

[I]f these speculators turn out to be right [that prices will be higher in the future] and earn themselves a tidy profit, they will have done us all a favor. By bidding up the price of oil today and filling the storage facilities to the brim, they will have caused consumers to conserve today in order to have more oil available in the event that we do run into a big shortfall in production before September. On the other hand, if the speculators turn out to be wrong, they bought high and sold low. That would be destabilizing, forcing us all through some current pain, which, if we somehow could predict the future with certainty, will turn out to have been unnecessary. Our only consolation would be that the speculators will undoubtedly feel our pain, and then some, as their multibillion dollar bets flew into the wastebasket.
So, the only reason I see to be concerned about the contribution of speculation is if you think that the speculators are in danger of making huge losses. But if that’s your concern, I have a simple cure — just put yourself on the selling side of some of those futures contracts — let their pain be your personal gain.