Posted on 08/29/2005 10:55:27 PM PDT by Aussie Dasher
RECORD oil prices this week were evidence of a speculative market bubble that was set to burst in the next 12 months and make the hi-tech crash of 2000 "look like a picnic", US business publisher Steve Forbes said today.
The price of light sweet crude topped $US70 a barrel yesterday as Hurricane Katrina headed for the US Gulf Coast, which accounts for about a quarter of US oil output.
Mr Forbes, editor-in-chief of the influential Forbes business magazine, said inflation and increased demand from China and India only accounted for a small part of the price raise from $US25 to $US30 a barrel three years ago.
"The rest of it is sheer bubble speculation," Mr Forbes said in Sydney at the launch of a business conference.
"I'll be blunt, there's hardly a hedge fund in North America that hasn't speculated on oil futures.
"So I'll make a bold prediction ... in 12 months, you're going to see oil down to 35-40 US dollars a barrel.
"It's a huge bubble, I don't know what's going to pop it but eventually it will pop – you cannot go against supply and demand, you cannot go against the fundamentals forever."
Mr Forbes said the higher the oil price rose, the harder it would eventually crash.
"I don't think it's going to go to $US100 but if it does, the crash is going to be even more spectacular," he said.
"It will make the hi-tech bubble look like a picnic – this thing is not going to last."
Mr Forbes urged the US Government to stop adding to its Strategic Petroleum Reserve (SPR), a 700-million-barrel reserve that is meant to be used in emergencies.
"The speculators know now that no matter what happens to the price of oil, Uncle Sam is there buying almost every day," he said.
"Stop the buying and in fact throw some of that oil on the open market, boy that would throw it in turmoil and send the price down."
The US Government has said it could release some of the SPR to overcome any shortages caused by Katrina.
Wouldn't that make a mess.
Dear God,
Please let Mr. Forbes be correct.
thanks,
Mike
"12 months, you're going to see oil down to 35-40 US dollars a barrel."
and 36 months after that you may and I stress may see gas drop to $2.00 a gallon.
Should the bubble pop who could get hurt besides the speculators?..and maybe oil stocks?
one bubble i wouldn't mind
I could handle that.
I actually think Gas prices will come down before oil prices do.
I'll tell you one thing...
I wouldn't want to bet against Mr. Forbes...
I hope so too. I just have my doubts. I could be wrong but it seems like every time oil goes up like this it never really comes down to where it was.
It could very well happen and be fund generated, when the hurricane season is over or even before, and there are no major supply issues in the Persian Gulf or elsewhere.
Hmmm...a commodity needed in almost every facet of the american economy drops in price and it's a bad thing?
What kind of crack are you smoking?
Skyrocketing petroleum prices will eventually effect every part of the economy in a negative way -except for oil stocks and the people who profit from high oil prices.
You're concerned about less than 1% going bad while 99% of the economy would benefit. Yeah, we should keep it sky high just so the people who've invested in oil stocks don't get soaked. Man.
Just another symtome of the information age if you ask me.
Suppliers get 'unexectedialy fast' info on the demand side, over-react and hedge the stock on the high end.
Seems pretty logical to me... though I forget 90% of people are morons (or at least 'blissfully ignorent' of the law of Supply & Demand)
Plus you can really screw yourself with the whole 'double-reverse-negative-thought-logic' and fake yourself into thinking people are REALLY UNDER-reacting.
But the smart ones... people like me... bet on people, overall, being stupid... at least for now.
If you're taking crude long, you gotta know its a huge risk.
Uh, and if it goes to $200 it will be even MORE spectacular. Sheesh, what a silly comment. Forbes should stick to the flat tax.
If I were Hugo Chavez, for instance, I wouldn't regard it as good news that the U.S. was no longer stockpiling reserves of petroleum. In fact, it would scare the crap out of me. The most dangerous lion is the hungry lion.
I can only hope it does hurt those pensions--it can leave them peniless who threw it all into oil speculating for all I care, pushing the price up hurts the economy long term because it hurts the purchasing power of ordinary Americans. This is the equivalent of Pete Rose betting against the Reds (sports fans think of it that way), and that's the straight dope...
Most people with pensions don't choose what to invest in. The fund managers do it for them. Ordinary Americans are exactly who will be hurt most.
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