This book is an attempt to capture the future impact and implications of the recent oil price increase. The recent scenario of rising oil prices is explained in terms of huge demand for oil, particularly in order to raise the strategic oil reserves by China and US. But the supply of oil has increased substantially as well; hence the rise in prices cannot be explained in terms of ‘supply-demand’ mismatch only. The random fluctuations of oil price are mainly because of ‘speculative reasons.’ This speculative element is particularly responsible for higher crude oil prices despite greater oil inventories. Though speculative trading generates additional liquidity in the market, this distorts market signals and increases volatility in the market. The ability of the Commodity Futures Trading Commission (CFTC) to monitor the nature and extent of this speculative trading is practically impossible in the face of unmanageable inflow of such ‘speculative dollars’ in energy markets. The most important reason for this is the lack of data since these exchanges are outside the regulation of the CFTC. In the face of rising oil prices, on the one hand, the efficient use of oil is becoming important and, on the other, the aspect of alternative energy sources is becoming important and hence needs to be explored.
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