Oil: on the other hand, we're not producing as much

Congress is holding hearings on oil speculation, the process where big institutions and individuals bet on the price of oil via the futures market. The issue, of course, is the sharp spike in oil prices in the past year. My previous post links to Paul Krugman's argument, that speculation is not a big factor.

On the other hand, a lot of folks are pointing fingers at the recent deregulation of oil commodity trading, at the end of the Clinton administration:

Several changes over the past decade have relaxed the agency's oversight of commodities markets. The Commodity Futures Modernization Act of 2000 (CFMA) allowed energy commodities for the first time to be traded on deregulated "exempt commercial markets," meaning exchanges exempt from CFTC or any other U.S. government oversight. This law was a departure from the Commodity Exchange Act of 1936, which had confined commodities trading to CFTC-regulated exchanges.

I'll let you decide for yourself. Here's a chart I threw together with oil prices ($/barrel, normalized for the falling value of the dollar v. the Euro), oil stocks (days supply in OECD countries), and the supply margin (world oil supply minus demand). All oil price, supply, and demand data is from the EIA. The dollar-Euro exchange rate is from FXHistory.

The supply margin has decreased in the past four years. But is it enough to have driven the price up over double in 12 months?