Reply #5: This was first discussed on May 20th, 2008, and it does NOT appear to be a bubble [View All]

For more see the May 20th thread:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3316805
I quote his article:

The only way speculation can have a persistent effect on oil prices, then, is if it leads to physical hoarding — an increase in private inventories of black gunk. This actually happened in the late 1970s, when the effects of disrupted Iranian supply were amplified by widespread panic stockpiling.

But it hasn’t happened this time: all through the period of the alleged bubble, inventories have remained at more or less normal levels. This tells us that the rise in oil prices isn’t the result of runaway speculation; it’s the result of fundamental factors, mainly the growing difficulty of finding oil and the rapid growth of emerging economies like China. The rise in oil prices these past few years had to happen to keep demand growth from exceeding supply growth.

Other experts in the field have actually pointed out that in the last two years WORLD WIDE storage of oil has actually DECLINED. In simple terms there appears to be a REAL SHORTAGE, that the right does NOT want to accept, for to accept it means to address it, and that means coming out with a way to reduce DEMAND. We can reduce demand by leaving the price go higher and higher, we can reduce demand further by increase taxation, we can reduce demand by buying less. This reduction is often do to increase price but the US military uses about 5% of world wide oil usage, thus a withdraw from Iraq AND mothballing the Navy and Air Force (And telling the Army to learn to March) may be the best way to reduce the present price of oil.

Krugman's Article on this subject:
http://www.nytimes.com/2008/05/12/opinion/12krugman.html?_r=1&oref=slogin