Are the folks on the NYMEX floor responsible for higher oil prices, or are peak oil supply and peak oil demand at work? (image: Nicholas Whitaker for HeatingOil.com)

Two major figures in the world of energy—an OPEC oil minister and a leading peak oil theorist—weighed in on the recent surge in crude oil prices. Qatar’s oil minister, Abdullah bin Hamad al-Attiyah, blamed speculators for surging crude oil prices, while Colin Campbell, a retired petroleum geologist, focused on the fundamentals of supply and demand to explain price and predicted that peak demand would keep the price of crude from topping $100 per barrel.

Al-Attiyah continued OPEC’s push to tie higher crude oil prices—the price of crude has increased by 24 percent since February—to speculation, telling the Associated Press that “nothing about this (crude’s recent price increase) is linked to a shortage of supply.” On March 22, oil ministers of other OPEC members—Germanico Pinto of Ecuador and Mohamed al-Hamli of the United Arab Emirates—also blamed speculators for driving oil prices. Al-Hamli called for regulation and endorsed a proposal by the Commodity Futures Trading Commission (CFTC) that would establish position limits on energy commodities.

OPEC’s attacks on oil speculators are motivated by at least some self-interest. If consumers don’t blame speculators for higher prices, then OPEC could be the target of their ire. Additionally, if speculation is responsible for pushing prices higher, then there’s no reason for OPEC to increase its output; no wonder al-Attiyah said there was “no need” for OPEC to schedule a special meeting to discuss production levels by member states.

Yet data from the Energy Information Administration (EIA) supports al-Attiyah’s claim that supply and demand have “nothing” to do with recent price increases. According to the EIA’s Weekly Petroleum Status Report for the week ending March 26, inventories of crude oil, distillates (including heating oil and diesel), and gasoline were all “above the upper limit of the average range.” That hardly points to a supply crunch.

But Campbell, who used to predict that peak oil would lead to an inevitable and painful price shock, has changed his mind about the direction of oil prices. Peak oil supply, which Campbell believes occurred in 2005, won’t lead to skyrocketing oil prices. Instead, a price mechanism will kick in and curb demand. People will turn to alternative energy sources as “peak demand” for oil sets in, keeping a lid on oil prices. “I think presently the price limit is about $100 [per barrel of crude oil],” Campbell stated.

In his conviction that supply and demand set the price of oil, Campbell sits in the perhaps uncomfortable company of oil speculators, who adamantly insist that speculation does not affect prices. What Campbell and defenders of speculation share, however, is the certainty that the market is working. OPEC—unsurprisingly, since it is a cartel—disagrees that the market for oil is functioning properly and setting a fair price.

As oil prices climb and strain consumers who have to pay more for home heating oil and gasoline, there may be some hope in the fact that both al-Attiyah and Campbell think there’s a solution that will restrain rising oil prices. While Campbell might eventually be right, and people may eventually heat their homes not with oil but with 100 percent biodiesel or some as-yet-undiscovered energy source, that’s not much help for people struggling with their energy bills right now.

OPEC’s solution—increased regulation of commodity markets—can’t guarantee low prices, but there’s a lot of evidence that speculation is inflating the current price of oil, and regulation could have an immediate impact and provide relief for consumers of heating oil, gasoline, and diesel.