The blog's argument that oil prices are now being entirely driven by financial market speculation has won support from one of the main state oil trading companies.
ICIS news reports that the CEO of SOCAR Trading (State Oil Company of Azerbaijan Republic) claimed that the "rise in crude and other commodity prices, resulted principally from the speculation of banks". And he went on to argue that "fundamentals would indicate that the price of crude should be around $30/bbl."
Speaking at the Asia-Pacific Petroleum Conference, he justified this claim by pointing out that "paper trading on the NYMEX and ICE exchanges in 2010 was worth $25,000bn, compared with just $2,000bn for physical oil". And he noted that "although crude prices had risen, OPEC spare capacity still stood at around 6m bbl/day".
Azerbaijan produces 1mbd of oil, and SOCAR believes that today's high oil prices are positive for the world economy, as they "cushioned resource-rich developing countries, including Azerbaijan, from the worst effects of the crisis". The blog strongly disagrees with this view, which ignores the impact of high oil prices in reducing discretionary spending (and therefore chemical demand) in the rest of the world.
But SOCAR's clear statement does give a clear indication of the downside risk to oil prices, should the QE2 lifeboat party ever end.