“You hear it everywhere in the press… ‘Oil is in a bubble and it’s all down to speculators driving up the price,’” says Garry White in his Garry Writes newsletter.

“But I’m telling you now, they are all wrong. The real driver of the price of oil is supply and demand. Long-oil speculation is not rising – it’s actually falling. Net long positions on WTI futures contracts fell 80% to 25,867 contracts on the New York Mercantile Exchange in the week ended 27 May. This compares with a record 127,491 on 31 July last year.

“The US CFTC [Commodities Futures Trading Commission] is therefore in a quandary. It has to produce a politically-motivated report on oil speculation at a time when speculation is falling. Rather them than me… but at least the report will be a humorous read.”

Bill Bonner’s not so sure. “Speculative capital is what the Feds create when they lend money below the inflation rate,” says Bill in The Daily Reckoning.

“It does not go out and invest in long term projects like steel mills. Instead, it looks for the hot, rising market… the one that will give it a quick payoff. The guy with the big house and the subprime mortgage was not really buying a house… he never paid for it. He was just speculating.

“And now his speculation has gone bad… and all the Fed’s hot air goes into a new bubble. When the tech stock bubble popped, for example, the next big thing was a bubble in housing and housing-related debt. When the housing and subprime bubbles popped we guessed that the authorities would pump hard to try to reflate them… but that the Fed’s inflation would go into new bubbles – in commodities, oil, and gold. So far, so good. Oil slid up past $135. Gold shot up over $1,000. And food? Food prices are so high they’ve set off riots all over the world. The OECD says high food prices are here to stay. And farmers in Argentina are setting up roadblocks, again, to try to starve the capital into submission.

“The bubble in residential property made people feel good. They thought they were wealthy and thought they could ‘take out’ a little of that wealth and spend it. A bubble in oil is an entirely different matter. It makes people feel poorer every time they fill up their gas tank. And it forces them to cut back on spending rather than increase it.”