11 ms·

Who is inflating the oil bubble?

7 points by ideas101 18y ago

josefresco 18y ago
Answer: Speculators. Not a lot of meat in that article, cool motorcycle though!
marvin 18y ago
I don't think this is a bubble at all. It seemed ridiculous to me that 30-40 year oil futures were valued at 50$ a barrel when most scientific theories of oil production dictate a dramatic decline in worldwide production during the next few years. In fact, I played with the idea of speculating on the 10-year price of oil a few years ago, but my understanding of markets at the time was not good enough to realize that there was actually a thriving futures market. Gasoline can't be stored for more than a few months, and getting hold of and selling physical crude oil is probably more hassle than it's worth. Perhaps the current development is a bit of an overcompensation..but not much of an overcompensation. The current price of oil is probably higher than is dictated by supply and demand, but when it comes to futures, a correction up has been in the coming for a long time. Unless all speculators are certain that we will have a dramatic increase in fuel-efficiency (on the order of 50% over the next ten years) across all markets that buy fuel, there is no hope that there will be an abundancy of oil in the future. Add this to the fact that China and India are expected to consume more oil in the future, and things look very different. I think what has happened is that speculators have finally realized this, and that the current price spike is caused by "speculators" correcting the price up to a realistic level. This is how markets are supposed to work, and no new laws or political hand-wringing will be able to do anything about it. Saying that this is a bubble seems like wishful thinking. When politicians start investigations to check out whether this is the case, there should be reason to worry. Actual bubbles are rarely identified with this great unity. If they are so certain, why don't the ambitious politicians of the US short crude oil futures for a few billion dollars? I think that would be quite an interesting spetacle.

7 points by ideas101 18y ago

Answer: Speculators. Not a lot of meat in that article, cool motorcycle though!

I don't think this is a bubble at all. It seemed ridiculous to me that 30-40 year oil futures were valued at 50$ a barrel when most scientific theories of oil production dictate a dramatic decline in worldwide production during the next few years. In fact, I played with the idea of speculating on the 10-year price of oil a few years ago, but my understanding of markets at the time was not good enough to realize that there was actually a thriving futures market. Gasoline can't be stored for more than a few months, and getting hold of and selling physical crude oil is probably more hassle than it's worth. Perhaps the current development is a bit of an overcompensation..but not much of an overcompensation. The current price of oil is probably higher than is dictated by supply and demand, but when it comes to futures, a correction up has been in the coming for a long time. Unless all speculators are certain that we will have a dramatic increase in fuel-efficiency (on the order of 50% over the next ten years) across all markets that buy fuel, there is no hope that there will be an abundancy of oil in the future. Add this to the fact that China and India are expected to consume more oil in the future, and things look very different. I think what has happened is that speculators have finally realized this, and that the current price spike is caused by "speculators" correcting the price up to a realistic level. This is how markets are supposed to work, and no new laws or political hand-wringing will be able to do anything about it. Saying that this is a bubble seems like wishful thinking. When politicians start investigations to check out whether this is the case, there should be reason to worry. Actual bubbles are rarely identified with this great unity. If they are so certain, why don't the ambitious politicians of the US short crude oil futures for a few billion dollars? I think that would be quite an interesting spetacle.