Energy Prices

Crude oil is traded on the New York Mercantile Exchange (NYMEX). Here's a link to NYMEX light sweet crude oil futures prices. You can click on one of the contracts to see its price chart.

Here's a May 2008 article from the Dallas Fed that outlines the factors driving oil prices. It does not address the role of speculators. A May 29 2008 article from The Economist provides data to show that the impact of speculators is small, and the determinants of the oil price are (surprise!) supply and demand. Another analysis shows that inelastic demand (elasticity of 0.06) could explain the price change on the basis of fundamentals. As you would expect, the Chicago Mercantile Exchange agrees that speculators are not the problem. An article in the Financial Times shows how banning speculation may have little or no effect on price volatility.


Gasoline is subsidized in many countries. This article in The Economist summarizes the prices in different countries. Some of The Economist's article was based on a Morgan Stanley analysis, which postulated that subsidies were artificially sustaining demand in emerging markets (that is. less-developed countries like Indonesia and Malaysia). This IMF working paper explains that fuel subsidies, while popular in developing countries, cause severe fiscal strain, divert scarce government resources from more productive uses and sustain demand at unrealistically high levels. The New York Times picked up on the story on 7/28/08, describing the impact of subsidies in Indonesia and China.

In June 2008 China raised energy prices significantly. Prices are regulated there. The artificially low price had led to shortages, as you would predict.

A Price Floor

Business Week suggests that a price floor for oil would spur innovation, reduce consumption and reduce greenhouse gas emissions.


The industry association for fuel ethanol producers in the United States is the Renewable Fuels Association. The role of the industry association is to represent the interests of the US ethanol producers. As you can see at the RFA web site, the US applies an import tariff of 54 cents a gallon for imported fuel ethanol from Brazil.

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