Sorry, but the speculators have grown to such a volume that they can alter prices independent of demand.
During 2008, we were told oil was spiking because of massive demand growth in China. But if you bothered to do any independent research, the demand growth just wasn't there at a level to justify the spike. Meanwhile, it came out just how many contracts were held by speculators.
And then we saw the entire oil bubble pop in late 2008. The suckers had been lined up, lured by the rate of return climbing up the bubble, and then the likes of the investment banks rode the shorts all the way down.
Now the bubble is inflating again for all commodities. Central bank policies are partially to blame - both by devaluating the dollar (which oil is priced by) but also by creating vast pools of cheap money that chase returns - and pouring money into commodities over the last few year or so has been quite lucrative.
A few simple changes could fix this problem, such as higher margin requirements and tighter position limits on exchanges such as ICE, as well as an end to QE. But I don't see that happening anytime soon. Too much money to be made off the backs of consumers around the globe.
“Sorry, but the speculators have grown to such a volume that they can alter prices independent of demand.”
Add “or supply” and “for a very short time” to your sentence. Also, the big boys hedge their bets, lowering price volatility. Speculators are a positive for the rest of us, including me, a small time speculator.