I'm a fool.
I should have shorted oil right then and there.
But bubbles are funny. They usually go on much longer than you think they ever could. The housing bubble lasted two years longer than most of us thought.
But that wasn't the case for oil. It imploded suddenly and fiercely, falling 80% in six months.
But hey, it hath been foretold. It's the timing that's always the trickiest.
_________
June 16, 2008
Are you ready for the Great Oil Bubble Implosion?
Bubbles are funny.
Until they aren't.
Let's look again at oil, where total world demand rose by... wait for it... a whopping 0.9% (YES, THAT'S ZERO POINT NINE PERCENT) over the past year, while world liquids and crude production increased slightly more than 1%. And yet prices per bbl. rose over 80% in the past year, and 697% since 2001. Pets.oil anyone?
So what's driving the current Great Oil Bubble (GOB) madness? Oh, maybe the $3.5 trillion in oil derivatives, or the $90 billion in speculative hot money that's poured into the new commodity indexes.
There is no consumer-market-based justification for the rise in oil prices. The madness is purely and simply a speculative one, just like housing, just like dot-com stocks, just like tulip bulbs and tea.
Yes, the same hedge funds, pension funds, investment banks and hot-money investors who gave you the housing bubble and mortgage madness are now giving you the GOB.
Bubble after bubble after bubble... Just as we expected. But with housing it was "HEY, COOL, WE'RE ALL GETTIN' RICH RICH RICH!!!!", while with the Great Oil Bubble it's "HEY, CRAP, WE'RE ALL GETTIN' POOR, POOR, POOR!!!".
Keep in mind that bubbles last longer than you think they ever will. But in the end, they end. All of 'em. And this one will too. Where and when will it end? Who knows. But when it does, it will end spectacularly and gloriously. And when it does, there will be RAGE in the streets as gas prices don't come down along with the price of oil. But that's another story...
There is one nice lasting effect with this Great Oil Bubble though - it has changed the world's collective consciousness in regards to fossil fuels and consumption. The "GOB" will launch a clean energy revolution - wind, solar, biomass, nuclear and even some energies as-yet-undiscovered. And SUVs and trucks are the new mink coats - their owners are now social pariahs, scorned and mocked while they piss what's left of their money away at the pumps.
And a word for the Peak Oilers out there - yes, at current consumption and production rates, we've got a problem. But what you don't take into account is that the world (i.e. 'the market') because of prices, political instability, global warming and the dramatic change in collective consciousness, will now be making The Great Change, away from fossil fuels as fast as it can. Past demand does not equate to future demand as your projections dictate. And a Big Change is coming.
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11 comments:
The oil bubble has not burst, because there never was a bubble in the first place.
You CANNOT have an oil bubble like you can a housing bubble. Speculators like Casey Serin could hord houses and limit supply. But for speculators to hord physical oil they would need some extremely large storage tanks. Sure they can trade paper oil, but that is a zero-sum game that can only have a short time effect.
Prices went up because demand rose faster than supply, and because we're at peak oil producers couldn't raise production. Now that we're entering into a world wide depression demand is dropping fast and prices are going back down. This however is only temporary until supply starts to drop faster than demand.
Quote: "The madness is purely and simply a speculative one, just like housing, just like dot-com stocks, just like tulip bulbs and tea."
You almost get it, but not quite. Check out www.chrismartenson.com and take a serious look at his "The crash course" powerPoint-presentation. I recommend every reader of this blogg to do just that - it wont be wasted time, I assure you.
We'll probably now be heading for even higher prices of oil, as the peak production is reached. From now on, the demand will be rising (the current crisis is probably just a short stop) and production will be dropping, as oil will be harder and harder to find. Probably, along with rising usage of alternative energy sources, price of oil will start to drop. We'll see in a few years.
Keith, there you go again with the religion thing. Global warming is nuttier than Pelosi, don't do that to yourself.
Prices went up because demand rose faster than supply, and because we're at peak oil producers couldn't raise production. Now that we're entering into a world wide depression demand is dropping fast and prices are going back down. This however is only temporary until supply starts to drop faster than demand.
January 23, 2009 8:50 AM
You sir, are just dumb as a post.
We'll probably now be heading for even higher prices of oil, as the peak production is reached. From now on, the demand will be rising (the current crisis is probably just a short stop) and production will be dropping, as oil will be harder and harder to find. Probably, along with rising usage of alternative energy sources, price of oil will start to drop. We'll see in a few years.
January 23, 2009 11:19 AM
Supplies are building on all levels while we are in the middle of massive production cuts. They have no place to put the oil their pumping right now AND SUPPLIES ARE BUILDING AFTER HUGE PRODUCTION CUTS did you not hear Keith. Dumb as a post. The global ponzi bubble will not reinflate (I'm talking about Chinas factories) Hey go buy oil.
Keith - Peak oil is real.
Google LATOC.
If those prices were reached for oil when suppy and demand were closely matched, just watch what happens over the next 10 years as supply declines EVERY YEAR FOREVER!
Oil will go to $200-300 within 2-3 years if not sooner.
Today food is oil - welcome to the die off.
#Anon
Peak oil is about flow rates, how much oil is currently in storage has really got nothing to do with it.
Output has been flat for four years now, and I believe 2010 will be the year we drop off the plateau.
http://europe.theoildrum.com/files/Oilwatch_jan09_05.png
Yes you are fool. How can any analysis of oil prices not consider the ultimate effects of all of this global money printing? When all fiat currencies are ultimately debased to their intrinsic value of zero, the world will FIGHT over all commodities including Oil, arable land, etc.
Did you tools see the special on 60 minutes about oil manipulation?Goldman sachs and other brokerage firms at the time were the biggest oil companies in the world, not exxon or chevron.We got fucked people.If you cannot see that you are as stupid as a gorilla.
I said oil would crash as the hedge funds got slaughtered.
that's now happened.
Now, will oil go right back up, as we repeat the cycle? And as the US dollar comes down?
Remember, no new project, no new infrastructure, no new R&D, no new exploration at $30. This may be like watching a snake eat a mouse. A supply bubble that works its way through, and then right back to the commodity wars
get popcorn
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