ITF Attributes Rising Prices to Supply and Demand


The Interagency Task Force (ITF) on Commodity Markets, in what has been conceded as a preliminary assessment, concluded that escalating oil prices can be best attributed to basic factors of supply and demand. The Task Force was formed in June by the Commodity Futures Trading Commission, to evaluate factors of supply and demand and different investor practices.

According to the Task Force, factors in supply and demand are the number one cause for the increase in fuel prices from January 2003 to June 2008. The Force reports that activity on the market has boomed, and that while this activity coincides with the increase of oil prices, the ITF's analysis does not conclude that speculation has driven the price increase.

The ITF reports that the demand for oil has increased substantially as worldwide growth from emerging market countries calls for a larger need for fuel. The ITF states that this, in conjunction with a low oil production compounded by several disasters and political unrest has caused soaring fuel prices. The task force points that if the price were being driven by speculation, detailed data produced daily would show speculation changes preceding price changes.

However, the ITF reports that this is not the case, and that available evidence shows that most speculators are documented changing their positions after prices changes, and not before. This, the ITF says, is exactly what one would expect to see in a correctly operating market.