Oil price differentials : markets in disarray: OIES paper: GWO3

The conventional wisdom about the current behaviour of oil prices is essentially very simple. It is comprised of two assertions and then an inference. It runs as follows. First, there is no physical shortage in oil markets. Secondly, there is no stockbuilding (or “hoarding”) at least not by the important oil companies. The price rises in oil markets since the Iraqi invasion of Kuwait can then only be due to “psychology” and “sentiment”. These latter terms have dismissive connotations. They suggest that oil prices are being pushed up either by speculation or by factors which are not easily amenable to “rational” analysis