ust a few months ago, politicians, economists, and some analysts claimed financial investors in oil futures were the market equivalent of warty trolls, operating in the shadows and screwing the unsuspecting American consumer by driving up the price of oil [1] for investment gains. Legislators in Congress held hearings to denounce the speculators and their evil art [2].

Speculators' defenders—other economists, a handful of hardy columnists, and the bulk of bank analysts—called those critics nitwits who just plain don't understand how markets work [3]. Millions of new car drivers in China and India and the world's dwindling supply of petroleum were to blame for oil's astonishing rise, they said.

Since then, oil prices have tanked about 70 percent. So can't we now concede that one side was right and one was wrong? Hah.

A financial layperson could be forgiven for assuming that such a steep and rapid drop, with a relatively minor drop in demand for crude, proves that the run-up was indeed a speculative investment bubble rather than driven by traditional supply-and-demand factors. A pox on speculators, then.

But putting an end to the debate is not so easy. Oil's drop, it seems, has mainly served to calcify the positions on both sides. Instead of coming to a consensus, they're both still convinced that they are right.

"It was never speculators," said Joseph Nocera, the New York Times columnist who dubbed the congressional hearings into speculators' role in high oil prices "wonderful theater [4]" in June and subtly compared the blaming of speculators to anti-Semitism, saying that "centuries ago, it was Shylock" who was vilified.

If anything, the drop in oil prices "debunks" the speculator theory, he said in a recent interview. Prices, he said, are still being driven by "psychology," not speculation.

On the other hand: "Yes, I was right," said Ed Wallace, a columnist for Business Week and the Fort Worth Star Telegram who has been a steadfast critic of speculators and their impact on markets. In May [5], he said regulators and journalists were getting snowed by banks into believing that speculators weren't influencing oil prices.

"There was no difference between the run up in the price of oil, homes, the stock market or any other commodities," Wallace said in an e-mail. "Everyone accepts it as fact on the other issues, but only a few have come around on oil." Wallace added that the people who agreed with him "still do" and those who don't "aren't going to come around."

Fadel Gheit, an Oppenheimer managing director, is a poster boy for the blame-the-speculators crowd. One of the earliest, most vociferous critics of speculators, he has long maintained that $50 a barrel is the real price of oil. "The run-up in oil prices was caused by the same financial players who caused the global financial crisis," he said.

Not surprisingly, he had a difficult year establishing his credibility before prices started to fall. "It was so hard for me to go and meet with investors," Mr Gheit said. "I went to London in April"—when oil neared $120 a barrel—"and I was almost thrown out of people's offices," he said.

Since oil prices tanked, not a single one of his opponents has had "the courtesy or decency to at least say, ‘You know what? You're right. And you know what? We were wrong,' " he fumes.

That's because they don't believe they are wrong. In March of this year, Goldman Sachs analysts said that if the economic stars were aligned, prices could even reach $200 a barrel, and in May they reiterated that view, citing geopolitical factors, including declining production in some countries.

Despite the significant tumble, Goldman Sachs is still pointing to the basics of supply and demand as drivers. A December report says, "We believe that the exceptional fluctuations in oil prices during the past year are largely fundamentally driven and will likely continue to characterize the oil sector in the medium to longer term."

Robert Bryce, the managing editor of the Energy Tribune, a magazine and Web site devoted to the energy industry, may be the only participant in the debate to change sides. He, too, blamed supply and demand this summer, but in a December column [6], he said it has become "abundantly obvious" that speculators were a key driver of the surge in oil prices. "So, to be clear, I was wrong," he added.

Predicting high oil prices before their plummet hasn't necessarily hurt any careers. Money manager Stephen Leeb also forecast $200 oil and wrote a book about how to "thrive" when that happens, warning that the last dregs of the world's oil supply will be as in demand as the Donner Party's last crate of food. Despite the drop the book is getting four-star reviews on Amazon.com. Leeb said that he still expects prices to reach the $200 level "sooner rather than later." The collapse in prices has "forced many producers to shut-in supply that otherwise would have come on stream," he said in an e-mailed response to questions.

Even economists are divided on the issue. Ramgopal Agarwala, a former World Bank economist who is senior adviser to an emerging-markets think tank in New Delhi, has often bristled at the blame assigned to India and other emerging markets for the oil-price spike. The oil drop "absolutely" proves that high prices were the fault of speculators, he said. "Fundamentals have not changed that much," he said.

Investors have poured several hundred billion dollars into commodities markets in recent years. Many of these money managers bet on market movements, essentially saying that rising prices will continue to rise and falling ones to fall. These types of investors can, in general, exacerbate price movements, both up and down, far beyond the range created by users and producers of any commodity. What's amazing, though, is that no one can really agree about how much, if at all, they influenced oil prices.

With both sides entrenched and unyielding, the debate may never come to a satisfying conclusion. The financial crisis and the auto-industry collapse also have overshadowed the fight. And now that the price of gasoline in the United States has fallen below $2 in most cases, no one cares anymore what's driving the price of oil.

"We're happy with cheap gas," said Gheit. No one is thinking about the "billions of dollars that were just sucked up" by investment banks who were speculating on oil, he said.

www.thebigmoney.com/articles...tor-sport