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.
see reply #60 - you don't know what you're talking about.
Break ground on one new major oil refinery and watch gas drop.
Hmmmm...seems so many are under the impression that SUV are only the Tahoe/Hummer/Surburban/Expedition/Durango variety.
The last 5-10 years I have experienced (tens of thousands of cars in surrounding lots) an absence of conversions vans, a dwindling number of large cars (Cadillac/Omsmobiles/Lincolns) and a total void of 'old junkers'.
Now for the last few years I have seen a great number of efficient Camrys/Hondas/Hyundais etc. A great number of efficient midsize/compact SUVs and many, many crossver Lexus/Nissans. All these cars have one common denominator=increased gas mileage. Increased efficiency, decreased pollution. Many of the midsize SUVs have a rating of 19-24/26 mpg, wherein the compact SUVs even a greater mpg.
Certainly there is surburban sprawl, a greater number of cars/drivers on our roads, and subsequently more homes/appliances all adding to the 'demand' for gas and its byproducts.
Yet one has to consider the 'supply' side in all this. The overbearing EPA regulations,(i.e. the gas reformulations for various areas/regions, the summer/winter reformulations). The stop on most new offshore exploration/drilling, the the present unfeasability of shale oil recovery. And of course the fact that a new refinery hasn't been built/completed since 1976.
And again, the India/China demand has also effected worldwide supply.
So much to discuss so little time......
What's your bottom line? Do you think Forbes is right or wrong.
all those people need to do is to get out of oil
Anyone with a pin?
If every crude producer is pumping at or near the maximum level and the oil price remains at $70, then why would the price drop? If the market can distribute $3 a gallon gasoline then why would the price drop. Now, if there is a drop in demand, then I can see the price drop. But the drop in demand must be 15% or so for that scenario to happen.
Stock in ping-pong balls and black stick-on numbers rise as NC Lottery passes.
Always liked Forbes.
He evolved from a purely fiscal conservative to a truly social/fiscal one.
Huh? I was in some oil, sold off recently. Made a bunch, but maybe it was a little too early. I'm holding on to my little drillers stocks until it goes back down to $45.
How does lower oil prices hurt the average Joe. Mutual fund traders are smart enough to get out quickly. You don't think they watch this crap with all 3 eyes?
Bottom line...I respect Forbes for his common sense...I believe he's correct in this.
As an aside...Many set forth that though gas has risen so much in the last few months 'YET' the American commuters/consumers still are lining up at the pumps. Some things are a priority, there aren't alternatives for many...but IMHO..demand/speculation will go downward. All these increased gas prices are undergoing an osmosis through the market systems. Will take awhile. Somethings going to have to give....consumer cutbacks will be enacted in many, many areas.
If Forbes is shorting, he's worth watching. Otherwise, he's just another blowhard.
I said this 8/29 ... glad to see Forbes joining my call on this:
"Because oil is over-priced and the price is unsustainable.
I sold Jan 06 and Mar 06, the hurricane will not impact for that long.
Two months ago oil was $50. Now it touched $70.
Sooner or later, the price will pinch demand enough to re-balance the supply /demand and force it back down."
http://www.menafn.com/qn_news_story_s.asp?StoryId=105197#top
"We hope that the resolution to the board to increase production and the ceiling, 500,000 (bpd) and 500,000 (bpd), and to refresh the dialogue with all the main consumers, I hope this will at least help the market and the prices to be more stable," Shaikh Ahmad said.
"The market is well supplied," Shaikh Ahmad said and added: "There is about or over one million bpd (oversupply) in the market. If we talk about demand and supply and other economic factors I don't think prices will reach $100 or even deserve to be near $70."
I may get my shirt handed to me, but I think Forbes is right - this latest leg into the stratosphere is not sustainable.
The bigger the rise, the grander the crash. JMHO.
I'm guessing we are very near the top. After hurricane season, and after another election in Iraq, there will be no momentum to hold it up.
Price target for 2006: $45.
Montag, the point with that comment of Forbes is that he wont be proved wrong if oil temporarily goes higher.
If it hits $75 next month, you can't just say "oh, I guess it's not a bubble" ...
It will only not be a bubble if it never crashes.
There are so many supply/demand reasons why $70 oil is not sustainable. that's his point.
SHORT OIL.
I wonder what the effect would be if a few speculators were identified and wound up very pubically at room temperature? They're hyenas and should regarded as such.
I think you missed the point. The price of gas will stay high, no matter how low the PPB of oil goes
"I think you missed the point. The price of gas will stay high, no matter how low the PPB of oil goes"
Well. with your self procalimed knowledge of the market forces, you should be a very rich individual.
A million dollars for a hedge fund. Who all invests in them, companies and such? I am not up at all on this sort of thing but would like to know more about what a hedge fund is and who buys into them.
"Should the bubble pop who could get hurt besides the speculators?..and maybe oil stocks?"
Oil stock prices have NOT increased in any direct proportion, to oil price increases, which validates Forbes' prediction.
It has happened before.
Hey Captain....Long time no read.....hope yer well !
Now if Forbes is right ......Anyone wanna sell a gas guzzling SUV today ?:o)
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