A key reason why oil prices have been going up is that Asia and the oil producing countries are consuming more while global oil production has stagnated. That means Europe and America had to consume less, and a very high price proved necessary to accomplish that.
My question is: what were speculators thinking a year ago, when oil prices, including prices for futures contracts expiring in 2008, were substantially lower than spot prices are today?
In my model, speculators understand that the flow production of oil is limited, that demand in Asia is increasing, that something has to give, and that mostly what has to give is demand in the U.S. So, starting last year, they bid the futures price of oil way up. Maybe, if my oil-expert commentators are correct, the futures price would have shot up relative to spot prices without causing producers to reduce production very much. And maybe this would have led to inventory increases.
But that process never got started. Instead, oil speculators acted as if high Asian demand and stagnant production was a huge surprise that only hit them this year. Oil speculators last year got it badly wrong. If you were "long" oil futures last year, you made a killing.
If you believe Hamilton's view of fundamentals, and you believe my view that it's the job of speculators to anticipate fundamentals, then what you should blame speculators for is keeping prices too low in 2006 and 2007 (in fact, in all previous years).
That is, in fact, the most plausible story. But it could be that today's speculators have it wrong, and that today's futures price for June of 2009 over-estimates the realized spot price that we will observe then. And if speculators do have it wrong, I do not know where to look for evidence of that.