Proxies for supply and demand accurately account for oil prices in 138 of 313 quarters from January 1938 to March 2018. In the other 184 quarters, reduced accuracy creates nine regimes when oil prices deviate from the level implied by supply and demand. Of these nine regimes, two are associated with policy interventions to suppress price increases. The other seven are associated with non-market forces, such as strategic changes by OPEC, panic buying or speculative bubbles. This historical analysis of the oil market indicates that factors other than supply and demand have a large effect on prices for extended periods (with the shortest regime being a year and the longest being more than two decades). By summing the additional price paid for oil consumed in the US, we show that in recent regimes, speculative bubbles transferred US$42.9 billion from US consumers to US oil producers and transferred US$87.4 billion from the US economy to oil exporting nations. This suggests significant economic losses.
Source: Ecology - nature.com
