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It's a part of the commodities cycle. It will continue to rise as long as demand remains strong and supply can't keep pace. Price is also fueled largely by a weaker dollar. Inflation is the cruelest of taxes. When our government doesn't want to fund their subsidies of various corporations, welfare queens, farmers, ect by asking Americans to pay more in taxes, they borrow the money for the federal reserve (which is a tax, though the vast majority of Americans aren't smart enough to figure it out). When you create more money, all of the money already in existance gets watered down. Too much money chasing too few commodities = inflation.
I wonder how much the IEA was paid by Big Oil to report that its not a bubble and speculators aren't responsible. The ones appeasing the speculators are usually speculators themselves. They don't want to jeporadize those billions flowing into their pockets every day.
From a technical standpoint look at the charts for light sweet crude.
No investment returns 133% in one year and is correctly valued.
This is a speculative bubble not a question in my mind.
No investment returns 133% in one year and is correctly valued.
I disagree. Gold and silver have returned that much already, some of the years since 2000. Yet the precious metals remain undervalued in terms of their inflation-adjusted 1980 highs. They are not in a "bubble" - yet.
Take your chart and put it up against the US dollar index. You will see a strong reverse correlation. That's the answer to your question right there.
Investors are not "speculating" in oil, or in gold and silver. They are trying to maintain the purchasing power of their dollars. Maybe they should just buy gold instead!
It's a "bubble" in that, over time, the price will go down alittle...demand has not gone up 100% in the last year, yet the prize of a barrel has. After awhile, reports of demand going down both here and in China will cause the price of oil to fall back to about $100 a barrel. Keep in mind that the price of fuel in China has gone up 20% as the government no longer subsidises it there, so their demand will also go down.
As for government spending...the US spent more on the stupid war in Iraq in May and June than it has on walfare programs all year. Who's the biggest welfare queen , not working and living off the US tax-payer's dollars? The nation of Iraq. Cut that fat none working cow off, and watch the soar as high Bush in his coke smoking college days.
Do you want oil prices to go down? Just go long on stocks that correlate to higher oil prices. I guarantee oil prices will go down. Nobody can make money off of oil by hoping for higher prices.
I agree it is about to burst. If it keeps rising, we will see the public try to get in on the speculation. Why haven't the big boys tried to convince the public that trading commodities is the way to riches? Perhaps there is no want to let the public to figure out that prices on things can be rigged to go up so easily. The public has no money to play the market you say? Well, then rising oil prices will definitely get a backlash from lower consumption and defiant consumer behaviors.
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