Comments on: Is the Oil Bubble Bursting?

By: Lefty

Lefty — Sat, 13 Sep 2008 08:13:44 +0000

Right on Superbad, I agree w/ your theory, & it's beginning to be evident. Do you have any website, blog, or even books of yours or anything that you would recommend?

By: jesse

jesse — Tue, 10 Jun 2008 20:54:32 +0000

Ironically, the US House of Representatives recently passed a bill making it illegal for foreign states to act together to "(1) limit the production or distribution of oil, natural gas, or any other petroleum product; (2) set or maintain prices for such products; or (3) otherwise take any action in restraint of trade for such products. Denies sovereign immunity or act of state doctrine protections for foreign states who engage in such such illegal conduct." The Senate is voting on it in a day or two.

Of course, at the same time, we're artificialing limiting our own production and forcing ourselves to be dependant on foreign states. Brilliant.

By: Josh

Josh — Sat, 07 Jun 2008 15:22:01 +0000

The US has plenty of oil to support itself. It is just our idiotic environmentally greenie insane government will not let us.

GIVE US NUCLEAR POWER!!!
GIVE US OUR OWN OIL!!!
GIVE US MORE REFINERIES!!!

GLOBAL WARMING IS A HOAX CONTROLLED BY ENVIRONMENTALIST AND GOVERNMENT BUSINESSES THAT EMPLOYS MILLIONS AND MAKES BILLIONS EVERY YEAR!!!

DRILL HERE. DRILL NOW. PAY LESS.
http://www.americansolutions.com/actioncenter/petitions/?Guid=54ec6e43 -75a8-445b-aa7b-346a1e096659
Over 400,000 signatures already.

By: Washu

Washu — Sat, 07 Jun 2008 08:43:43 +0000

Q: Is the Oil Bubble Bursting?
A: well DUH!!!!

By: Dave

Dave — Sat, 07 Jun 2008 06:40:35 +0000

Drill here, drill now. A huge deposit was recently discovered in North Dakota. No pristine wilderness to spoil, and no pesky Cannuks to worry about. Just drill & refine and watch the prices go down. Not for a while, but down it will go. And speaking of refining, this last Tuesday we just got a step closer to having the first new oil refinery built in the US in 30 years, in southeastern South Dakota. An election was held whether to allow the area to be rezoned to allow the refinery to be built, and it passed by a 60/30 margin. (Rueters article)

By: John H.

John H. — Sat, 07 Jun 2008 03:38:09 +0000

The price of oil will keep going up as long as people keep buying it at the given price. Its the law that companies act in the financial interest of their shareholders. This means make a profit. Do that by any legal means. It seems a no-brainer to try raising the price if the product seems to be in demand. If people stop buying the stuff (or slow down buying the stuff) maybe we're charging too much. Even then, they have to work out whether or not it would be better to sell less, but at a higher profit per sale, or lower the price and sell more. This is why spreadsheet software was invented.

By: Parker

Parker — Fri, 06 Jun 2008 21:48:16 +0000

@Thomas..agree. OPEC used to not be so smart about their resource..early on we (the United States, England, etc) were on the winning end of that deal and now we aren't and we shouldn't be because you know..it's not ours.

By: johnk

johnk — Fri, 06 Jun 2008 20:59:32 +0000

@alex

superbad is right. Yes, there are fundamentals that started driving oil prices higher.

But the fact of the matter is, the price of oil is not dictated by what goes on the ground, it is dictated by the futures market. The futures market is practically unregulated and "big money" can print up as many futures contracts as they want regardless of how many barrels of oil are traded on the ground. And usually they also buy oil ETFs which purchase their newly minted futures from them in a feedback loop, driving the price up cyclically.

Whenever you have a bailout by printing money to solve your problems, that money goes to the big banks etc first before it reaches the little guys (us). When it reaches us it causes inflation. So before it reaches us, the big banks, funds etc put their money into an asset class, and the inflow of money creates its own market. We saw this with the dot-com's, with RE, and now with commodities.

Yes, there are fundamentals driving oil up. But the futures market is becoming increasingly disconnected from the facts on the ground. Smart money is exiting oil now, like the subject of your article. Oil may continue to bubble for some time, but you never know when its going to pop. Heebner and Jim Rogers think this is just the beginning of the oil/commodity bubble. Other more conservative investors are getting out to watch from the sidelines.

I suggest, if you are interested in learning more about this, to research the commodity and futures markes, as well as financial derivativest. It is a disaster in the making. Highly unregulated, like the stock market pre-depression era.

By: Thomas

Thomas — Fri, 06 Jun 2008 20:34:12 +0000

I'm convinced that price gouging plays a major role. If OPEC didn't control the market with an iron fist, we'd probably only be paying half. OPEC keeps the supply artificially low to raise the price.

By: superbad

superbad — Fri, 06 Jun 2008 20:30:15 +0000

Yeah, I realize it's not linear, but the point remains. The Chinese economy has been growing at ~10%+ for over a decade. On the supply side, the Iraqi invasion took a huge chunk of oil production offline for a couple years. Neither of those events made any real difference in the price of a barrel. There is more than simple market economics at work here.

By: Alex

Alex — Fri, 06 Jun 2008 20:18:21 +0000

@superbad: "In the last year or so, the price of a barrel of oil has doubled. Global demand has not come anywhere near doubling in that time, and global production has certainly not dropped by half."

That's not how supply/demand works - a doubling in demand doesn't translate to a doubling in price. Neither will a drop by demand in half cause the price to drop by half.

An increase in demand by a few percentage point over supply can cause price of oil to soar.

By: superbad

superbad — Fri, 06 Jun 2008 19:57:44 +0000

In the last year or so, the price of a barrel of oil has doubled. Global demand has not come anywhere near doubling in that time, and global production has certainly not dropped by half. That should tell you that the price of oil is being influenced by something other than the basic supply and demand rules of the market.

The current price is a result of excess investment money controlled by entities like hedge funds and sovereign wealth funds looking for somewhere to go. The global economy is awash in capital, far more than it knows what to do with. Those funds have left the American and European mortgage markets, and entered the commodities markets. That is why gold, food, and oil have exploded in price despite supply and demand of all those things being fairly stable. The bubble will eventually burst, and the money will leave the commodities markets and find somewhere else to go. Then the price of food and oil will return to their levels of a couple years ago. Mark my words.

By: JK

JK — Fri, 06 Jun 2008 19:53:02 +0000

Hmmm, first a recession may bring the oil price down, then a adverse feedback loop will create additional monetizing by the FED, pushing the oil price back to the upside. Then the deeper recession will further advance the adverse feedback loop, pushing more workforce out of employment, more liquidations, more monitizing, more high oil prices, more recession, more unempoyment, yet more liquidations, yet more liquidations, yet more monitizing. Yes, we will get some fireworks!

By: Archbob

Archbob — Fri, 06 Jun 2008 19:41:09 +0000

Mark my words, oil will be double this price soon. We need alternatives.