There was a meeting at the World Bank Springs Meet where professors of reputed universities met to discuss the regulation of the excessive speculation in the commodities market. The following are some of the points that were discussed during the conference:

a)      Speculative fever does not represent real demand and leads to price distortion

The prices reflected in the trading platform, represent a wide array of views of various participants knowledge regarding a particular commodities prices. In short, it is running on the demand and supply theory. Prices have a positive relationship with demand whereas prices have an inverse relationship with the supply of a commodity.  But the participants in this conference argued that speculators trading in a commodities market platform do not represent the real demand as they are trading with the sole intention of earning profit and not seeking delivery of the particular commodity. This distorts the price since if more and more speculators take long position in the particular commodities; it represents a false increment in demand. This paints a false picture in the market. In other words, supply and demand equilibrium remains the same despite price volatility.

b)      Middle East crises has nothing to do with oil price volatility

Most of the traders are aware of the MENA region crisis and the series of political dead-lock which took place. Most of the traders have attributed the increase of crude oil prices to the crisis, but the participants at the conference have blamed the speculators for the increment. The reason being that as the crisis in the said region grew; the speculators started taking unaccountable long positions which enhanced the value of the crude oil prices to reach a 3 year high.  The participants believed the demand and supply had nothing to do with the increment, it was all in the minds of the speculators.

c)      Level of commodity speculation is unprecedented

Apart from the speculators, hedgers and arbitrageurs are the other participants in the commodities market. But the participants believed that the impact of the speculators clearly outperforms the impact of the other two. While the number of hedgers has decreased in the market, the speculators have increased three-fold. In the energy category alone, speculators have increased by 64 % from the mid-2008.  

The above discussions clearly indicate that the speculators have wrongly misrepresented the markets as they distort prices. Some economist should take the pains to find out how far speculators move prices away from fundamentals. That would frame us a clearer picture of how the speculators are affecting the prices. Till then, it is all open to interpretation.