Pure speculation on my part, as I admitted.
Robert Samuelson reports on the large stocks but points to a much more ordinary reason for the supply build up:
The big players are institutional investors -- pension funds, hedge funds (pools of loosely regulated funds) and investment banks. They've purchased oil futures contracts and, in effect, bet that prices six months or a year out will exceed present prices. Since 2002, investment in futures contracts may have quintupled to more than $100 billion, estimates energy economist Philip Verleger Jr.
This may have raised present (or "spot'') oil prices, argues a staff report from the Senate Permanent Subcommittee on Investigations. As investors pour money into futures contracts, futures prices rise. Since late 2004, they've usually exceeded spot prices. On a recent day, the spot price was $74.60 and the futures price for December was $2 higher. This creates an incentive for companies to put more oil into storage (``inventories''), the report says, because it's more profitable to sell oil in the future than today. Oil inventories for industrial countries ``are at a 20-year high.'' Spot prices rise because there's less oil on the market.
It's unclear how much this sort of speculation has increased prices, if at all. The report mentions estimates ranging from $7 to $30 a barrel. In theory, the process could feed on itself and create a huge bubble. The more speculators bought futures, the more oil would go into storage -- and the more spot prices would rise. At some point, the bubble would burst. Storage would be filled. Unexpected increases in supply or shortfalls in demand could put huge downward pressures on prices, because sellers would need to sell and (again) demand is inelastic.
The worries prompting this behavior are quite real, as Samuelson notes. But if the many "what ifs" don't happen, the price could drop a lot. Or, if we attack Iran, the stockpiles could make up for Iranian shortfalls for some finite time--hopefully long enough to win.
And I freely admit that the hidden hand of the markets is far more likely as a cause for higher stockpiles than the hidden hand of government planning.
