But, and it is a very big but, will it take an economic collapse, i.e. a depression, to pop the bubble?
No. I think that all it will take is for the speculators to realize that up isn’t inevitable and lose their confidence. The fact that places like CNN are starting to talk about the possibility of a crash tells me that it’s going to be sooner rather than later.
Popping of bubbles is fairly predictable. When you reach the point where pundits are saying it's not a bubble and other pundits are saying it is about to pop, the end is near. This happened with the tech bubble. It also happened with the housing bubble.
Remember 2004 when a few people were starting to say housing was a bubble, but most were saying prices would escalate forever? Two years later in 2006 the bubble was starting to burst and by 2007 it was deflating rapidly. Comparing the oil bubble to the housing bubble we are now probably around 2005. I would not be surprised if oil prices began to slump after the summer driving season is over. I expect oil prices to be volatile next year with lots of ups and downs. Oil prices will likely go into a steady downward trend starting fall of 2009.
Of course I didn't stay in a Holiday Inn Express last night, so I could be way off the mark.