As monotonous as my posting about the "oil bubble" has been, I just watched a segment on CNN’s Situation Room [I was hoping to learn more about Illinois Governor Blagojevich] in which some pundit explained why gas prices are down. He said the Recession had driven them down and to expect them to escalate again soon.
So here I go again. The high oil prices were not due to the fundamentals, even though the fundamentals are a problem [the fundamentals include OPEC’s monopoly on oil, the world’s dwindling oil resources, and the effect of oil consumption on the environment]. This was a bubble – one of several to pass our way recently. Speculators on the Oil Futures Markets jumped on the rising oil prices and up they went, price way outrunning value. This bubble popped on June 15th, three whole months before the Stock Market fell. The oil bubble burst first.
If we can keep oil consumption down, in spite of the falling price, we will be waging war with OPEC for the first time since their inception. The Bubble that brought them such riches can hurt them in a big way. And their confusion about how to respond indicates that they are in more disarray than we knew.
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