carguy101

http://www.businessweek.com/lifestyl...ge_top+stories

Interesting read, I thought.

gengar

There is a major flaw however, and it's amusing that the author basically offers that flaw as parts of his argument when it's really self-contradiction. It's silly to say that demand is down because consumption is down, then point out that speculation is up. Demand is not just a function of consumption.

kt22cliff

Speculation is not part of demand though. I think the author's basic point is that the real market supply-demand should not be supporting $100+ crude which in turn causes higher gas prices b/c refiners have to buy crude to make gasoline. In NYMEX since this oil/commodity boom started, the vol of oil future contract held at the end of expiration far exceeded in multiples of what can be physically delivered at Cushing, OK. Which means those non-delivered contracts are what could/should be considered "speculation". Now this will work until there are next sucker available and ready to take the futures contract but when they run out of suckers - most likely when the big money speculators move to next boom whatever that is - the oil price will come crashing down.

carguy101

In the late 90's, we had the stock market bubble, and we all know how that ended...

In 2000 to 2006, we had the housing bubble, and we all know how that ended...

Perhaps we are in a oil bubble now?

I must confess that I don't know enough about the fundamentals of oil to say what's really going on.

But it is my hope that the oil "bubble" bursts and prices plummet. I'm sick of how oil execs and speculators are just lining up their pockets by the billions...

gengar

Um, of course it is.

I mentioned this in a past thread, and said that unlike most other bubbles, the general public will be quite happy with this one bursting.

kt22cliff

Since you are in Las Vegas, how are the condos and real estate market doing in Vegas? The condos in LV and lots of real estate prices in US in 2002-2006 went up NOT b/c there were "real demand" increase - for example baby boomer population increase in the middle of the last century - but b/c there were speculators flipping condos left and right. Once those speculator exited - b/c now they can't get the cheap financing and there are no more sucker etc etc - prices came down and are gonna go down even more.

I guess you are argueing that while there is speculation that should cound toward "demand" but the author's position is speculation is not a real demand in a sustainable way. Price of crude is "inflated" due to speculators. Right now they are all in oil and commodities b/c that's what's going up. But once the speculators find something else to put their money to work, the crude price will come down even more than the housing price in percentage terms.

gengar

I am not arguing anything. I am pointing out the fact that speculation drives demand, which contradicts both your statement I quoted and two of the main points he presented. As I noted, it is also ironic that he chooses to mention speculation as his third point.

I completely understand what you are saying, but we're talking about different issues. To go on and on about how a shortage is "artificial" is inane in the context of the intent of the article. He talks about how it's not demand and how there's no shortage. Well, a shortage is a shortage. Being artificial only affects whether it is a good investment or not. No one called the housing boom in Las Vegas artificial through the 90s and had the construction expansion stopped at that point, then no one even today would be calling it that either. Only when there's oversupply, and people realize it many years later, suddenly it becomes "artificial" and we should blame the government for not intervening at the moment it became "artificial"? Get real. The article is bunk.

LexFather

Good points about the oil bubble.