current consumption, but for future use. What is common to all speculative purchases of oil is that the buyer is anticipating rising oil prices. Speculative buying may involve buying crude oil for physical storage leading to an accumulation of oil inventories, or it may involve buying an oil futures contract, provided an oil futures market exists. Either strategy allows one to take a position on the expected change in the price of oil. Standard theoretical models of storage imply that there is an arbitrage condition ensuring that speculation in one of these markets will be reflected in speculation in the other market (Alquist and Kilian 2010). It is immediately clear that speculation defined in this manner need not be morally reprehensible. In fact, speculation may make perfect economic sense and indeed is an important aspect of a functioning oil market. For example, it seems entirely reasonable for oil companies to stock up on crude oil in anticipation of a disruption of oil supplies because these stocks help oil companies smooth the production of refined products such as gasoline. The resulting oil price response provides incentives for additional exploration, curbs current consumption, and helps alleviate future shortages. Hence, it would be ill-advised for policymakers to prevent such oil price increases. In the public mind speculation has a negative connotation because it is viewed as excessive. Excessive speculation might be defined as speculation that is beneficial from a private point of view, but would not be beneficial from a social planner's point