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.
'everyone in america' ??? Get a freaking grip.
you really need to get a grip. You are apparently clueless.
If you didn't read the part in the article where Forbes says that all funds are speculating in oil, you're the clueless one.
Thanks to a nasty divorce and child custody case, I rent and own no stock or retirement.
Let all the bubbles burst... ;^>
I'd bet money that Forbes is correct. The price increase from 30 to 70 doesn't make sense in the time frame mentioned.
If 30 was a market price 2 years ago, and it's more than double that today, then where is the great new need that wasn't there then, but is here today?
there isn't one....
its all speculative....kinda like the Housing market....
Mass suicides on the NYMEX ensue. Can't wait!!
/grabs popcorn
So we should continue to pay high prices so the highly speculative hedge funds are safe? Do pensions really invest in the hedge funds? Is that wise?
I'm curious to know how close to capacity is the Oil Reserve and how many barrels a month do we buy.
Mr. Forbes was my choice for President TWICE!
Love that analogy and that movie.
yeah...my parents too, at least the 2nd time.
that was before I could vote :)
Sorry to hear that, but when you're on the couch with one hand on the remote and the other in a bowl of popcorn watching "Rescue Me" or "Shield" and no one is breaking your chops you can't tell me it's not the best money you ever spent ;-)
So there is no reason, other than speculation, why the oil price should be higher now than it was a year ago. My guess is that it will drop down to that level by year's end.
I hope he's right, the sooner the better.
Yes, but over the past 5-10 years SUV purchases have gone thru the cieling so all those people who traded in their 30mph VW bug to a 14mph Tahoe are using twice as much fuel. Add to the the ongoing population shift from failed Democrat cities to suburbia where they drive twice as far and you can see how demand has gone up.
I would be interested in knowing what the ave mpg of the population of autos on the road is and what simply doubling that mpg would do to demand.
Unless they were cashing out their 401 (k) they lost nothing but some tally marks.
Now if they were directly invested in stocks, like lots of folks I know who bought Cisco stock in late 99 early 00, THEN you will see some arse losing.
Mr. Forbes is correct, the price of oil does not remotely match fundamental facts.. its futures manipulation by the same folks that brought you the tech bubble.
He says all hedge funds. You need a million dollars in net worth to even qualify to buy into a hedge fund.
To the average American, hedgefunds don't normally mean anything....Of course there was that big one a few years back that sparked off the Asian currency crisis but it was bound to happen anyway.
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