Bubbles

One of the curses of the capitalist based economy is the propensity for bubbles to periodically arise. Investors and speculators want to make money. So they put their money where they think it will grow the most. In the late 90's it was high tech. The internet!! Its going to change the world!! I'm going to buy everything off the web in the future. My groceries. My shoes. My socks. (Yeah, there was a website called socks.com where you could buy socks.)

That bubble burst.

In the early 2000's it was real estate. YEAH!!! Thats where its at! They aren't making any more of it, and look at all these people! They need somewhere to live. My house will double in 3 years, I'll sell it and retire. I'll just get one of those no money down, interest only, subprime loans, get that 5000 square foot house on the 10,000 square foot lot for me and the missus, and we'll be set for life.

That bubble burst.

Now, its oil. YEAH!!! Thats where its at! They aren't making any more of it, and look at all these people! They all have to go somewhere. I'll speculate on oil stocks. They'll double in 3 years, I'll sell them, and then retire.


I don't think oil will ever be $10 a barrel again, but nothing goes up forever. I'm using less of the stuff because its so damned expensive, and I think most other folks are too. At the height of any bubble, the one thing everyone is convinced of is that this one's real, and that the price will just keep going up and up and up forever.......

Part of the high pump prices in the US have to do with oil co. gouging and deliberate bottlenecking gas at the refinery stage.

Part of it is rampant speculation on the part of investors and hedge funds (the bubble you mentioned - it also applies to other commodities like food)

And it is true that demand, at least in the US, is down slightly from 1 year ago, but the increase in demand in India and China more than makes up for our slight slowdown in consumption, and pruduction worldwide seems to be at a plateau. It's possible that lowered demand and increased exploration spurred on by all the extra money being invested could result in lower oil prices in the near term, but I would expect the long-term trend to be up, up, up - especially with flat or dropping supplies in the face of exponentially rising demand.

The impact would be shortages. I'm aware of no shortages or outages. Supply seems to be just fine.

Yes, they aren't making any more oil -- there's a fixed amount. There's a fixed amount of real estate too. The population is going sky high, but in spite of that real estate is pretty much toxic at this point.