Public policy can encourage this bursting bubble scenario. The Democrats want to tax the oil companies or use the antitrust laws against them. Big mistake. More taxes get you LESS oil and "concentration" in the oil industry is not really the problem. The on-going Congressional hearings "investigating" oil prices and profits is a charade and is purely political theater. The very same federal and state governments that complain about high oil prices continue to tax gasoline at a rate (40 cents per gallon) far higher than the profit rate for the oil companies. So much for government concern about consumers.
What was it that Ronald Reagan said were the scariest words you could hear? "I'm from the government, and I'm here to help."
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George Soros also thinks it's a price bubble and it'll burst in the not too distant future although he's looking for a recession in the Indian and Chinese economies before that'll happen.
Whenever there's a resource scare I just blow the dust off my copy of "Limits to Growth" and see how many industrial resources we're already supposed to have run out of.
Mind listing a few, and when we were supposed to run out of them?
I find it interesting that Soros thinks the price will go down while Pickens thinks it will go up. Of course, both are basing their views on how staunchly they think Americans will stick to the green initiatives once gas hits $4.00 a gallon. There was an interesting editorial in the Dallas paper Sunday discussing how more than half of the price rise was due to speculation. Isn't that what caused the mortgage loan crisis as well-flipping houses for exorbitant prices until someone gets left holding the bag? It's a scheme. And at some point all those bright young boys who bought light sweet crude futures at the top of the market are going to be hating themselves when Florida is opened up. Heck, Cuba is drilling off shore NOW, in OUR OIL PATCH!! And selling it to Venezuela!!! And then think for a minute about who is making money while all these "green" initiative are keeping Americans from drilling for oil here and now....I betcha the lists are similar....
I'm not a big fan of the "oil bubble" theory, although I believe the Soro's scenario is possible.
However, most bubble's are popped by new supply. You can't plant a bunch of oil seeds and harvest them next year. It takes years. Admittedly, reducing demand is somewhat equivalent to increasing supply, but the increasing demand of India, China and the rest of Asia cannot be ignored.
That said, when the upper CNBC rolling index quote display has the "center quote" set to the phrase "America's Oil Crisis", I think it's safe to say that the recent runup in oil prices is overdone.
In the interest of full disclosure I am in some oil trades.
Here ya go: http://dieoff.org/LimitsToGrowth.htm
"Copper, with a 36-year lifetime at the present usage rate, would actually last only 21 years at the present rate of growth, and 48 years if reserves are multiplied by five."
The basis year for these figures is, I believe, 1972 although I won't swear to it since my copy of "Limits" is buried while we're painting the bedroom.
Assuming though that my sometimes faulty memory isn't faulty in this case, the list of industrial resources that should be diminishing in supply is as follows: aluminum, gold, lead, manganese, mercury, molybdenum, natural gas, petroleum, silver, tin, tungsten and zinc with the platinum group hitting the wall next year, copper the year after. And that's using the last column, the "Exponential Index Calculated Using 5 Times Known Reserves (years)".
Obviously, "Limits" is wrong all down the line including petroleum but that was apparent long before now. The classic "put up or shut up" challenge was the bet between Julian Simon and Paul Ehrlich concerning the price of ten commodities of Ehrlich's choosing. Ehrlich lost the bet at a walk and him and the enviro left have been trying to spin the bet ever since.
With regard to T. Boone Pickens rise to environmental sainthood, I think it's likely to have more to do with the substantial state and federal subsidies that are available for that sort of nonsense. Michigan's own cupie doll governor, Jennifer Granholm, is flogging a wind-farm scheme that's going to cost the state a bundle. With Michigan's economy in the toilet, you've got admire her timing.
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