{"id":2670,"date":"2008-12-06T20:21:10","date_gmt":"2008-12-07T01:21:10","guid":{"rendered":"http:\/\/1boringoldman.com\/?p=2670"},"modified":"2010-10-05T23:18:57","modified_gmt":"2010-10-06T03:18:57","slug":"the-oil-bubble","status":"publish","type":"post","link":"https:\/\/1boringoldman.com\/index.php\/2008\/12\/06\/the-oil-bubble\/","title":{"rendered":"the OIL bubble&#8230;"},"content":{"rendered":"<div align=\"center\"><img decoding=\"async\" vspace=\"7\" border=\"0\" src=\"http:\/\/1boringoldman.com\/images\/3bubbles2.gif\" \/><\/div>\n<div align=\"justify\"><img decoding=\"async\" vspace=\"4\" hspace=\"5\" border=\"1\" align=\"left\" src=\"http:\/\/1boringoldman.com\/images\/oil_well_animation_6.gif\" \/>Looking at the effect of the <font color=\"#200020\"><strong>DOT.COM<\/strong><\/font> and <font color=\"#200020\"><strong>HOUSING<\/strong><\/font> bubbles on the Stock Market raised a question for me. <font color=\"#400040\"><strong>Why didn&#8217;t the bursting of the <font color=\"#200020\">HOUSING<\/font> bubble lead to a fall in the Market?<\/strong><\/font> Seems like it should&#8217;ve, to me [having become a bubble expert since I found out what a bubble was in September (Ha!)]. So I started looking for another bubble. It was easy to find, since it can&#8217;t be lost on any of us that the <font color=\"#400040\"><strong>$4+\/gallon<\/strong><\/font> gas prices have plummeted. So I Googled <strong>&quot;Oil Bubble&quot;<\/strong> and found a number of people before prices took a dive [<strong><a href=\"http:\/\/www.nytimes.com\/2008\/05\/12\/opinion\/12krugman.html\" target=\"_blank\">Krugman<\/a><\/strong> included] that pooh-poohed the idea that Oil prices shooting up was a sign of a bubble. It was because of &quot;fundamentals&quot; not speculators, they said.  <\/div>\n<div align=\"center\"><\/div>\n<div align=\"justify\">Well, it quacks like a bubble to me. In fact, what else could it be? The price soars for no apparent reason, then tanks abruptly. This synopsis [and the original linked article] seem explanatory to me:  <\/div>\n<blockquote>\n<div align=\"center\"><strong><a href=\"http:\/\/ttrammohan.blogspot.com\/2008\/08\/oil-bubble-burst.html\" target=\"_blank\">Oil bubble burst \t      <\/a><\/strong><\/div>\n<p> <\/p>\n<div align=\"justify\">I read an excellent <a href=\"http:\/\/economictimes.indiatimes.com\/Opinion\/Guest_Writer\/Speculators_at_the_pumps\/articleshow\/3378354.cms\"><strong>analysis<\/strong><\/a> in ET today of the issues related to the oil bubble. The author, a Chief economist with a US think-tank, addresses each one of the arguments made as to why the oil price rise was related to fundamentals and not speculation. He shows the arguments are dead wrong (quotes from the article in italics):<\/div>\n<ul>\n<li>\n<div align=\"justify\"><strong>Oil prices rose because of a weak dollar:<\/strong> The price of oil has risen far more than the dollar has fallen. That means that oil prices have increased in other countries, which should have reduced, not increased, demand.<\/div>\n<\/li>\n<li>\n<div align=\"justify\"><strong>Oil producers have held back production in anticiption of higher oil prices down the road<\/strong><strong>:<\/strong> Nor have there been any report of unusual production cutbacks &mdash; the linchpin of the second argument. Indeed, the spike in oil prices actually gives independent producers an incentive to boost production.<\/div>\n<\/li>\n<li>\n<div align=\"justify\"><strong>There can&#8217;t be speculation in oil because inventories have not risen<\/strong><strong>:<\/strong> the storage argument fails to recognise different types of inventory. Thus, record-high speculative prices have likely caused bunker traders<a target=\"_new\" href=\"http:\/\/economictimes.indiatimes.com\/Opinion\/Guest_Writer\/Speculators_at_the_pumps\/articleshow\/3378354.cms#\" onclick=\"adlinkMouseClick(event,this,3);\"><\/a> to release inventory, but those releases may have been purchased by speculators who are now active lessees of commercial storage capacity. The implication is that speculators can drive up prices and increase their inventory holdings even as total commercial inventories remain little changed.<\/div>\n<\/li>\n<\/ul>\n<\/blockquote>\n<div align=\"justify\"><img loading=\"lazy\" decoding=\"async\" width=\"144\" vspace=\"4\" hspace=\"5\" height=\"108\" border=\"1\" align=\"right\" src=\"http:\/\/1boringoldman.com\/images\/oil_well_animation_4.gif\" \/>The Bull Market since early Clinton days looks like it&#8217;s been a <font color=\"#300030\"><strong>Speculator&#8217;s Market<\/strong><\/font>, bubble after bubble. The Market drove up prices on its own, without underlying substantive &quot;fundamentals&quot; to explain the rapidly escalating prices. <font color=\"#400040\"><strong>This is a sign of a Market that is very dangerous, too unregulated, and ultimately a Market that has done widespread damage to untold numbers of people.<\/strong><\/font> All the economists are <em>speculating<\/em> why people refuse to recognize a bubble when it&#8217;s happening. It&#8217;s interesting that some of the people who are chiding others for not listening about the <font color=\"#200020\"><strong>HOUSING<\/strong><\/font> bubble, are also people who were saying there was no <font color=\"#200020\"><strong>OIL<\/strong><\/font> bubble. And now, about those record profits from the Oil Companies? And, by the way, this <font color=\"#200020\"><strong>OIL<\/strong><\/font> bubble started when we invaded Iraq. <\/div>\n<hr size=\"1\" \/>\n<div align=\"justify\"><font color=\"#300030\"><strong>Update:<\/strong><\/font> So, it looks like I&#8217;m no big discoverer after all. Put &quot;oil bubble&quot; in Google, then click &quot;<a target=\"_blank\" href=\"http:\/\/news.google.com\/news?q=oil%20bubble&#038;ie=utf-8&#038;oe=utf-8&#038;rls=org.mozilla:en-US:official&#038;client=firefox-a&#038;um=1&#038;sa=N&#038;tab=wn\"><strong>news<\/strong><\/a>.&quot;<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Looking at the effect of the DOT.COM and HOUSING bubbles on the Stock Market raised a question for me. Why didn&#8217;t the bursting of the HOUSING bubble lead to a fall in the Market? Seems like it should&#8217;ve, to me [having become a bubble expert since I found out what a bubble was in September [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_forum_subforum_count":0,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-2670","post","type-post","status-publish","format-standard","hentry","category-politics"],"_links":{"self":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/posts\/2670","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/comments?post=2670"}],"version-history":[{"count":0,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/posts\/2670\/revisions"}],"wp:attachment":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/media?parent=2670"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/categories?post=2670"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/tags?post=2670"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}