Everyone knows that oil prices are high because demand in places like China has boomed while supply has remained stagnant or fallen. But some oil analysts are focusing on a different issue: the amount of oil that's being held off the market in storage.
These analysts say the oil market has created big incentives to hold on to oil rather then sell it.
The steady increase in the price of oil is usually explained in a fairly straightforward way. Fast growth in China and India has created a market in which supply just barely matches demand. And in a market sensitive to possible disruptions, anything from political unrest in Nigeria to corroded pipelines in Alaska can bring a spike in prices.
That's the typical explanation. But some in the industry think it's too simple. They say other factors are just as important as the relationship between demand and supply. Chief among them is "contango," a market term for the situation in which a commodity -- like oil -- has a higher future value than its current price.
Oil companies and others like to buy futures contracts to make sure they've got oil coming to them well into the future. But lately, people who have nothing to do with the oil industry are buying oil futures, holding them as can't-lose investments that can return well over 10 percent.
Investment banks from Morgan Stanley to Goldman Sachs are making so much money from oil futures that they've become a hot investment for all sorts of big-money players.
Some of the biggest players are U.S. pension funds, which have put billions of dollars into oil futures. At least one analyst thinks that pension funds have become part of the machinery driving higher gas prices.
"I think if you saw all the pension funds walk away," says Ben Dell, an oil analyst at Sanford Bernstein, "you'd probably see a $20 drop in the crude price."
Dell compares removing pension funds from the oil market to "losing the whole of Chinese incremental demand."
The problem, he says, is that pension funds and other investors are buying oil to remove it from the market -- which can help drive up demand -- before selling it for a profit some months later.
Dell believes that when the world's oil storage capacity is met, bankers and fund managers will look elsewhere for profits. That, he says, would almost certainly benefit consumers.
There are many oil analysts who disagree, though. They say oil prices will stay high as long as there is trouble in the Middle East. And that could be for a very long time.
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