Publications: Notes at the Margin

Pumping Crude; Oil Silos (April 5, 2021)


This Notes at the Margin presents two commentaries. The first, “Pumping Crude,” focuses not on getting oil out of the ground but boosting oil prices. On Thursday, April 1—April Fool’s Day in many parts of the world—OPEC announced a slow increase in crude production. Shortly afterward, the widely quoted Goldman Sachs commodity trader Jeffrey Currie predicted $80 per barrel crude by the third quarter.[1] It was a timely forecast, released on a day where there was little volume. Prices jumped, spurred by Wall Street analysts and traders like Currie. Our analysis suggests that hot money surged into the market.


All investment banks need to “pump” oil prices. Open interest has declined by almost ten percent from its peak a few weeks ago. The decrease occurred as prices dropped. Statistics from mid-2014 through March 30, 2021, show that money managers are driving prices. Prices rise when they add to their net positions and fall when they sell.


In our second section, we turn to oil “silos.” Here, “silos” references the behavior described by Financial Times writer Gillian Tett. Her book The Silo Effect depicts the tendency of all industries to work within silos, that is, a “system, process, department, etc. that operates in isolation from others.” The inhabitants of these silos communicate with others in their company and business, but no one else. We use the Oxford Institute for Energy Studies here to exemplify how such silos function. Bluntly speaking, the organization seems to listen to and publish information on oil and natural gas produced by writers, some of whom may have academic backgrounds, who know only energy and have no interest in anything outside energy. As Tett explains, using the 2008 financial crisis and other examples, disaster awaits those who restrict their knowledge in this manner, ignoring occurrences in and information from the broader world.

[1] “Oil to Hit $80 in Q3, Goldman’s Currie Predicts,” Bloomberg Studio 1.0, April 1, 2021 [].



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