by Mark Thoma, University of Oregon (Department of Economics)

Visit Economist's View

Speculation and Bubbles

Posted on August 05, 2008

Suppose you think that a hurricane might disrupt oil flows in the future. What should you do today? Tropical storm Edouardo gives an example. As the storm approached, people believed there was a chance that oil flows would be disrupted in the future, and the current price began rising as a consequence. If you expect a higher price in the future due to reduced supply or any other reason, you should begin purchasing and storing oil now to take advantage of the higher price in the future, and the increased demand for oil drives today's price up.This is speculation, the storm may or may not actual...

Original article link


crude , drilling , economy , gas