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Why is the price of petrol falling?

During the late spring and summer of 2008 as petrol prices were rising drastically, we were told various different reasons behind those rises. It was because of the weakness of the dollar, the increase in demand and the approach of peak oil and the impact on supply. Or all of the above, or some of the above.

However, there were strong suspicions that a significant proportion of the rise was due to the market speculation on the part of investment banks, commodity traders and hedge funds. This article (albeit coming from a particular “angle”) cites that 60% of the rises we saw earlier in the year were due to speculation alone.

Not being a financier or an economist, I don’t know myself, and I haven’t seen any specific evidence for any of the arguments.

However, what is very noticeable is that since many of the worlds larger financial institutions have become strapped for cash because of the fallout from the “credit crunch” caused by their exposure to sub-prime mortgages, we’ve seen a significant decline in the price of oil.

In fact, we’ve actually seen a decline of about 60%. Spooky!

Do the oil speculators from late spring and summer now have no more spare cash to play with on the oil commodity markets, and thereby causing the price to drop?

Did they in fact try to manipulate/speculate on the oil commodity markets earlier in the year in an effort to actually bring in some extra cash quickly to cover the hole in their finances that they saw coming because of the sub-prime problems?

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