Why Isn't The Rise In Oil Prices Being Called A Bubble?

[ThomWV]

Obviously the rise in oil prices is little more than a bubble caused by speculation; estimates are that as much as 65% of the current price is caused by speculators. Why isn't anyone calling it what it is, a bubble?

[MadHound]

1. Because frankly I don't think that it is a bubble

I think that the price is reflecting the fact that we're running out of cheap oil. I also honestly think that they're blaming part of the price raise on speculators in order to not panic the populace. But given that Saudi Arabia simply can't raise its production, along with the fact that many other foreign oil exporters are starting to run dry, it is becoming increasingly obvious that we're on the down hill slope of cheap oil availability.

I will grant that the declining dollar is also contributing to this mess, but overall, I tend to blame the fact that we're running out of cheap crude more than anything.

[Virginia Dare]

5. I agree we're past peak oil...

and the demand just gets higher. Back to horse and buggy by the end of the century, provided we're still around and not under water.

[Kelvin Mace]

2. Bubbles have to pop. Exxon and Co. won't

let that happen.

Seriously though, it isn't a bubble. Oil is over-valued, if anything it is still under-valued since it is a depleting commodity in a rising demand market. We are heading to $4 and beyond this year.

[Nicholas D Wolfwood]

3. I agree with Kelvin - it's not going to burst.

They can charge whatever they want and we have to pay, at least until we find a legitimate alternative.

[KharmaTrain]

4. Mr. Creosote Disagrees...

It's called glutony. Get the most you can while you can and take it to the bank...be damned of how it affects others (even yourself)...greed is what's for breakfast, lunch and dinner, every day. Recently a buddy was laughing at the high oil prices...I looked at him like he was wasted...he said he's got a ton of Exxon/Mobil stock and while he's paying more at the pump, his portfolio continues to rises...his line "I take it from this pocket and put it into the other".

We have no real idea of what the world oil supply is...how vast or how much remains. It's the game to manipulate and to "reward" all of boooshie's oil buddies.

[A wise Man]

12. I agree with you...

... its all about greed. Since there is no law to stop these greedy corp.thugs and those that have stock in the commodity, they can and will do as they please and damn the rest of us. Remember when the rethugs thought they would win the house and senate in 2006, they lowered the gas prices back to 1.79 a gal. When they lost, they raised it back up and its been going up every since. They are greedy and they are going to get all they can before the Dems. take over the full house and senate. We have to stop making excuse to rationalize the unrational. Its greed thats all just greed.

[liberal N proud]

6. Because the price of Oil will never come down

[fasttense]

7. ThomWV you are correct. The high gas prices we are seeing are reflections of a bubble.

The international price of raw crude has been climbing since 2002, and so has the retail price of gasoline.

A bubble is a very interesting creature that has certain traits according to Ravi Batra from "The New Golden Age". These traits are:

1. No one ever recognizes a bubble when it forms and after it forms, rational explanations are designed to deny that the increase in price is artificial. (peak oil, increased consumption by China, decreased supplies etc..)

2. Once it has formed and is well established, experts claim it is permanent and will go on forever. (Buy land they aren't making any more of it. Housing prices always go up.)

3. Once the price is predicted to rise, speculators move in and the prophesy becomes self-fulfilling. That is what hedge funds are doing in the market for oil futures right now. That is what people did when they flipped houses or built hundreds of Mc-Mansions.

4. A time comes when experts expect no fall in prices, ever. I've heard predictions for the cost of a gallon of gas to go as high as $6.

Like the 1970's OPEC oil embargo, the current bubble is a supply side bubble. Except now, instead of OPEC doing the price fixing, the 5 big oil monopolies are fixing the price.

The FTC, providing cover for the five oil monopolies, claims the rise in price is due to OPEC, and increase demand from India, China and the US. (OPEC only supplies 38% of global output, while big oil supplies over 60%)

Crude oil inventories are rising or are at high average levels, depending on which week you look or what type you compare. But overall inventories are NOT decreasing. http://www.dallasnews.com/sharedcontent/dws/bus/stories/031308dnbusoilinventories.4960a16b.html
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt

As yet there has been no decline in oil inventories around the world. Have you seen any gas lines?

There have been over 2,600 mergers in the oil industry since the 1990s. There are now 5 major monopolies who have cornered the oil market: Exxon-Mobile, Chevron-Texaco, British-Petroleum-Amoco-Arco, Royal Dutch-Shell and Conoco-Phillips. (Just their names tells you these mergers are forming monopolies.) These are the bullies profiteering from the self generated oil bubble.

In a fair and free market, a rise in demand, when matched by a rise in supply, generates NO price hike. But when monopolies rule the world, increased demand makes prices spike because monopolies have a built in excuse for raising their prices and no one can underbid them. In the 1980 and 90s, demand consistently rose also. But there were very few price spikes because the global oil market was far more competitive.

Then of course there are the speculators among the hedge funds which have jump in on the band wagon. So stand by folks, this bubble too will go poof.

[Subdivisions]

8. How's the weather this morning in

Cornucopiaville?

[notesdev]

9. The price of oil is not going up

The dollar is going down.

Measured against a hard standard - the price of gold - oil has fluctuated in a very small range for decades.

[L. Coyote]

10. I've heard it called that. The price is inflated by "investors" not speculators!!

And with good reason. It is a reliable commodity in an unreliable market. I would call this hedging, not speculation. Oil is the modern equivalent of the gold standard. In previous economic situations, investment moved to precious metals when currency was unstable. Today, that investment moves to oil instead.

Oil was $11 a barrel, and then the oil guys got installed in the White House, on Junta Day--12/12/2000.

This is a real bubble, from $11 to $111! It can burst. And then, a new wave of investment losses will follow.

[Arctic Dave]

11. From the answer I've read I would have to say yes and yes.

First. Yes output is gradually going down while demand is going up.
Second. Yes there is a bubble from investors and speculators but we will not see a "crash" unless one thing happens and that is the the producers have to throttle back on production because supply far exceeds demands. So far, that is not the case. How would you be able to tell you ask? First drilling will stop, then you will see them shutting in high maintenance wells, then you will start to see a drop of services and employment for oil field service companies (schlumberger, halliburton, baker, etc.). Without these companies oil doesn't flow and when oil is too abundant like in 90's their equipment sits idle until the oil producers can make money again.

[El Pinko]

13. It's only part speculation. Part is dollar weakness and part is demand/supply.

It may drop somewhat, but It's never going back to $40/bl.

[Subdivisions]

14. Oil and Gas inventories post negative builds. New intraday records

being broken today. This comes on the heels of an EXPECTED BUILD of inventories.

Supply vs. Demand. Fundamentals.

Summary of Weekly Petroleum Data for the Week Ending April 11, 2008

U.S. crude oil refinery inputs averaged 14.2 million barrels per day during the
week ending April 11, down 113,000 barrels per day from the previous week's
average. Refineries operated at 81.4 percent of their operable capacity last
week. Gasoline production moved lower compared to the previous week,averaging
8.8 million barrels per day. Distillate fuel production rose slightly last week,
averaging 4.0 million barrels per day.

U.S. crude oil imports averaged nearly 8.9 million barrels per day last week,
down 33 thousand barrels per day from the previous week. Over the last four
weeks, crude oil imports have averaged more than 9.2 million barrels per day,
about 1.0 million barrels per day below the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline
blending components) last week averaged 950,000 barrels per day. Distillate fuel
imports averaged 260,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) decreased by 2.3 million barrels from the previous week. At
313.7 million barrels, U.S. crude oil inventories are in the lower half of the
average range for this time of year. Total motor gasoline inventories decreased
by 5.5 million barrels last week, and are above the upper limit of the average
range. Both finished gasoline inventories and gasoline blending components
inventories decreased last week. Distillate fuel inventories increased by 0.1
million barrels, and are in the lower half of the average range for this time of
year. Propane/propylene inventories increased by 0.1 million barrels last week.
Total commercial petroleum inventories decreased by 8.0 million barrels last
week, and are in the lower half of the average range for this time of year.

Total products supplied over the last four-week period has averaged nearly 20.6
million barrels per day, up by 0.1 percent compared to the similar period last
year. Over the last four weeks, motor gasoline demand has averaged nearly 9.3
million barrels per day, up by 0.8 percent from the same period last year.
Distillate fuel demand has averaged 4.2 million barrels per day over the last
four weeks, down 0.9 percent from the same period last year. Jet fuel demand is
3.0 percent lower over the last four weeks compared to the same four-week period
last year.

Inventories down + increase in demand = higher prices (just like anyting else)

NO BUBBLE!

[Subdivisions]

15. Ummm....kick. Where are you Cornys now? Reports like these

have become the norm, rather than the exception.

THE AGE OF OIL IS COMING TO AN END!

[JackRiddler]

16. Because it's not a bubble, the era of cheap oil has ended

There are artificial aspects to the current rise - keeping Iraqi oil off the market, crisis in the ME, dollar decline - but oil will never return sustainably to the price and supply levels of the past, and the energy available from it will gradually be depleted. There will be conversion to solar-hydrogen economy, or there will be a stone age.

http://atimes.com/atimes/Global_Economy/JD17Dj04.html

The rise of the new energy world order
By Michael T Klare

Oil at US$110 a barrel. Gasoline at $3.35 (or more) per gallon. Diesel fuel at $4 per gallon. Independent truckers forced off the road. Home heating oil rising to unconscionable price levels. Jet fuel so expensive that three low-cost airlines stopped flying in the past few weeks. This is just a taste of the latest energy news, signaling a profound change in how all of us, in this country and around the world, are going to live - trends that, so far as anyone can predict, will only become more pronounced as energy supplies dwindle and the global struggle over their allocation intensifies.

Energy of all sorts was once hugely abundant, making possible the worldwide economic expansion of the past six decades. This expansion benefited the United States above all - along with its "First World" allies in Europe and the Pacific. Recently, however, a select group of former "Third World" countries - China and India in particular - have sought to participate in this energy bonanza by industrializing their economies and selling a wide range of goods to international markets. This, in turn, has led to an unprecedented spurt in global energy consumption - a 47% rise in the past 20 years alone, according to the US Department of Energy (DoE).

An increase of this sort would not be a matter of deep anxiety if the world's primary energy suppliers were capable of producing the needed additional fuels. Instead, we face a frightening reality: a marked slowdown in the expansion of global energy supplies just as demand rises precipitously. These supplies are not exactly disappearing - though that will occur sooner or later - but they are not growing fast enough to satisfy soaring global demand.

The combination of rising demand, the emergence of powerful new energy consumers, and the contraction of the global energy supply is demolishing the energy-abundant world we are familiar with and creating in its place a new world order. Think of it as rising powers/shrinking planet.

This new world order will be characterized by fierce international competition for dwindling stocks of oil, natural gas, coal and uranium, as well as by a tidal shift in power and wealth from energy-deficit states like China, Japan and the United States to energy-surplus states like Russia, Saudi Arabia and Venezuela. In the process, the lives of everyone will be affected in one way or another - with poor and middle-class consumers in the energy-deficit states experiencing the harshest effects. That's most of us and our children, in case you hadn't quite taken it in.

Here, in a nutshell, are five key forces in this new world order which will change our planet:

MORE
http://atimes.com/atimes/Global_Economy/JD17Dj04.html

[Subdivisions]

17. China's GDP Grows 10.6%; Bank Reserve Ratio Rises

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTMnp9Vfd2xM&refer=home

China's economy grew 10.6 percent, faster than estimated, and inflation was close to the quickest in 11 years, prompting the government to order banks to set aside more money to slow lending.

Gross domestic product for the first quarter grew more than the 10.4 percent median estimate of 24 economists surveyed by Bloomberg News. Consumer prices climbed 8.3 percent in March, the statistics bureau said today in Beijing.

As the U.S. economy falters, policy makers in China, the biggest contributor to global growth, still regard inflation and overheating as bigger threats than a slowdown. The central bank raised the proportion of deposits that lenders must set aside as reserves to a record 16 percent to cool an economy that has grown more than 10 percent for nine straight quarters.

``The central bank moved so soon after the GDP data as a gesture to show that they're taking inflation seriously,'' said Wang Qing, chief China economist at Morgan Stanley in Hong Kong. Wang said the central bank may order increases in the reserve ratio ``every two or three months.''

-snip-

With growth like that, in conjunction with economic contraction in Europe and the US, wonder where what's left of the oil is going to go?

I wonder when China is going to get pissed at our efforts to deny then their oil, and therefore, their growth.

[dysfunctional press]

18. because it ISN'T a bubble. learn a little something about supply & demand.

the supply is going down, and the demand is going UP.

figure it out.

[Subdivisions]

19. Profit-taking in progress. Will we find the new bottom at $110?

EIA raised their projected bottom last week from $87 to $101. Wonder if they'll adjust again after this rally and sell-off?

[BlooInBloo]

20. Teh stupid it BURNS!!!

[Subdivisions]

22. Some people simply refuse to read the writing on the wall. n/t

[Orsino]

21. Petroleum is a finite resource. Housing's a product. n/t