Doctor Jerry presents sound, reasoned opinion. Which of course means he’ll be held up to the flames next LASFS meeting he comes to, and some liberal, somewhere, is considering pulling Dr. Jerry’s Guest of Honor invitation because he supports that horrid nuclear power and called Obama (heavenly sigh) a moron.
Good article by Jerry Pournelle (never heard of him before now). Thanks for posting.
As one newsletter writer said today: “Cheaper oil — yes. Cheap oil — no.”
What the MSM call the energy crises is caused by the government not by the energy situation. We have more than enough oil, natural gas and coal and sufficient technology to provide all of America’s energy needs. The problem is the politicians have disrupted the energy supply and prevented additional energy production in the US. If the Democrats would just go away America would have no energy problems.
The bubble occured primarily because people could use money they didn't have, i.e. credit, to bid up house prices severely over a relatively short period of time.
If all of the speculators in the oil market are using real money to purchase oil futures then what we are most likely seeing right now is the real price of oil.
If, however, speculators are highly leveraged and using loads of credit to speculate in oil, then the current price may very well be a bubble.
The question to ask is not whether a particular persons economic actions with regard to oil are investments, speculation, or even manipulation, but whether the actions are executed with real money or on credit.
My understanding is that there is no one place that anybody can go to find out how much money is being traded on oil futures, and what percentage of this money is real and what is credit.
As far as the short term goes, if you know the answer to that question then you know whether to go short or go long.
As far as the long term goes, if the market believes that global warming is happening and that governments will ultimately deal with it, then the market will not expect oil shale and oil sands to become competitors to traditional oil. If solar, wind, and nuclear are viewed as pipe dreams, then the price of oil will continue to go up.
Since the aging of the baby boomers in the US, and the 50-odd million abortions since 1973, many companies wanted new, growing markets.
And the problem with creating the new markets is that they produced mostly for export to the US. And with all the investment money rolling in, it created the classic "too many dollars (or rupees or whatever) chasing too few goods", hence inflation.
Add changes in the US to allow speculating on credit, and the prevalence of hedge funds, to chase higher returns than the slow-growth US economy, and you have a commodity bubble.
Pop the bubble be insourcing to the United States, thereby reducing world demand. :-)
Full Disclosure: See articles I wrote on this here and here.
Cheers!