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more!     Political Risk As a Fundamental  Without question,
commodity indices and other similar funds have allowed a lot of
capital to flow into the market, and the fundamentals would not
seem to justify prices reaching $147 per barrel. Still, it is
hard to make the case that the market didn’t work or that new
regulations will prevent future price spikes.  Consider the 1979
Iranian Revolution, when there was no serious amount of trading
in oil futures (heating oil contracts had just been introduced).
Prices soared for about two years, even as the market came
quickly back into balance.  And inventories soared even
as prices rose.  What both periods have in common is a high
degree of political risk to oil supplies, which no doubt created
what we now call a “security premium”.  This helps explain why
people speculated in oil, an activity that will not be
eliminated by any amount of regulation.  What Goes Up Can Go
Down  Also consider that “speculation