ANNANDALE, Va. (MarketWatch) -- Is the oil market at $135 per barrel forming a bubble, vulnerable to being popped like Internet stocks did in March 2000?
What would be your answer to this question if the price of a barrel of crude rose to $250, which some serious analysts recently have begun to predict?
Not surprisingly, newsletter editors have lots of conflicting answers to these questions.
But there is one set of issues that gets relatively little attention in this debate over oil's true price: The oil market is not as unfettered as we might otherwise hope or think. To that extent, the laws of supply and demand do not play the same roles as they do for securities whose markets are freer.
One adviser who has focused on these issues is John Dessauer, editor of the Investors World newsletter. In a recent communication to subscribers, he discussed the impact on the price of oil of the Commodity Futures Modernization Act, which Congress passed in December 2000. One consequence of that legislation, according to Dessauer, is that "the oil market has been grossly distorted."
By how much?