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.
I did short Crude on Sunday night, and again yesterday, but it keeps coming back up.
In general the investors in hedge funds are wealthy individuals.
Hedge funds get their name from their orignial purpose - to hedge risk. A manager would buy some things long and some short (the shorts are the ones you profit on by going down) and hope to eek out a profit between your long and short positions.
Now a hedge fund is simply an unregulated mutual fund for wealthy people to invest in. Like mutual funds there are some good ones and a lot of bad ones. I doubt the little guys, like me, are not missing anything not being in these things.
My Exxon Mobil has gone sideways for the last three months, so i agree with you and Mr. Forbes.
"I did short Crude on Sunday night, and again yesterday, but it keeps coming back up."
What month?
Oct 05 nymex via IB
It amazes me when people idiotically say oh this war is fought over oil. I am thinking even if true, wars have been fought over less things than that.
I doubt the demorats would back any way unless we are invaded by aliens from MARS.
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