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Are We in the Peak of an Oil Bubble?

physorg.com — Since 2003, worldwide oil prices have quadrupled. According to a new study, the price of oil is rising at a faster-than-exponential rate, and cannot be sustained. In other words, we’re in the midst of an oil bubble, say researchers. The recent oil price run-up has less to do with supply-demand interplay and more to do with speculation.

Who dugg this? Made popular Jul 8, 2008

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  • imacommi, on 07/07/2008, -5/+62I always trust the scientists more than the speculators.
  • ZZeke, on 07/07/2008, -8/+54Whether you subscribe to "peak oil" theory or not, it has absolutely nothing to do with current oil/gas pricing. The Saudis have made it crystal clear that this is not a supply/demand problem. For once, I completely trust them in their blunt analysis. I tend to believe that the current ***** oil bubble is being propped up in order to recover losses from the ***** housing bubble. Wall street can no longer sustain itself without "bubbling" one sector or another, and average profits just aren't enough to keep the wall street monster from going hungry. Only astronomical profit margins will do, and oil/gas is a no-brainer, because we will continue to pay no matter the cost.

    Let's get real, folks - what did you think would happen when we allowed an oil man into the oval office?
  • inactive, on 07/07/2008, -6/+45I don't care so long as we get the point across that we have to abandon oil altogether.
  • inactive, on 07/07/2008, -4/+30We are in a bubble. Of course, the government will step in just as the tide would turn, thus keeping prices up.
  • Waiting2awake, on 07/08/2008, -0/+18Are you going to allow that after what we just witnessed? The great thing about renewable energy, and that which scares the power players, is that it can not generally be done from a single location. The days of owning a powerplant to feed energy to the masses are over.

    Renewable energy works incredibly well if it is used as a distributed system. That thousands of small producers feeding their overage into the grid. See how Germany did it.
  • johnhummel, on 07/08/2008, -2/+16Or, the government will do what they should - remove the Enron loophole, prevent this speculation market from existing when it shouldn't, and enforce investigations into market manipulation - and then prices would go down as investors realize their ***** won't fly any more.

    Oh, wait - hold on OMGZ REGULATION - what was I thinking?
  • inactive, on 07/08/2008, -0/+13i'm for ethanol, but only if its raw materials come directly from the hands starving african children
  • musicmanryan, on 07/08/2008, -5/+18Yes the bubble will pop, so instead of having $5/gal gas, we get $4/gal gas. Big f-ing deal. My hope is that the price keeps going up so as to cause a fundamental change in our petroleum-based society.
  • rollaryne, on 07/08/2008, -2/+13This breaks down into to core arguments: supply v. demand and speculation.

    A number of people point to the demand from China and India driving the cost up exponentially over the last 3 years. Problem with this view is that OPCE, and the Saudis independent of OPCE, have increased production a number of times so that supply has been exceeding demand.

    What is new to the futures (Oil) world is institutional investors (read speculation). Demand had been growing due to the growth of China and India, and the institutional investors jumped on the band wagon in 2004/2005, China and India leveled out and forgot to tell the investors.

    In reality, both arguments are right. This is a bubble caused by increased demand. The demand has pulled back, but the futures market is still greedy and continues to put the price up.

    Also, good reading can be found here: http://hsgac.senate.gov/public/_files/052008Master ...
  • kh99, on 07/08/2008, -0/+10"Further, the models showed that the bubble is close to a local peak, and we may have even reached the peak already. On the other hand, the researchers noted, this critical peak may also be embedded in a larger-scale bubble, one that could develop in the coming months and years."

    In other words, they don't really know anything.
  • korvan504521, on 07/08/2008, -0/+8but the speculators are saying that speculation isn't the problem!!!
  • imightbewrong, on 07/08/2008, -1/+8Thats a horrible graph for so many different reasons
  • darkened, on 07/08/2008, -1/+8Buried for idiocy, oil is arguably the most important substance on this planet as it's integrated to every portion of our lives from fuel to energy to plastics. Now should you have said we need to lessen our dependence on it as ENERGY, I would surely have agreed. Oil is too precious of a material to continue wasting to be burned.
  • dinobot, on 07/08/2008, -4/+11I remember some analyst for CNBC mentioning that speculators were not the reason of the oil's obscene price hike, and instead it was a matter of supply and demand (something the OPEC leaders had already previously said were not the true reasons for the current price trends) - of course, most than likely he is one of those speculators with the majority of his portfolio invested in oil futures, so, of course he is not going to put the blame on himself and those of his ilk.
  • Sanduu, on 07/08/2008, -6/+13Let's get all green and oil will get cheaper.
  • invasi0n, on 07/08/2008, -2/+8And what's gonna happen? A new product will take its place and the same bastards will control it.
  • Calibur, on 07/08/2008, -0/+6Scientists give facts. Speculators ... well speculate on those facts. So choose your side.
  • theJeebus, on 07/08/2008, -0/+6They caused the real estate bubble.
  • inactive, on 07/08/2008, -0/+6Early speculators got rich, late speculators get blamed and go broke.

    You always know you are at the top (or bottom) when the government starts stepping in.
  • mulling, on 07/08/2008, -0/+6lol you've never been to china, have you? bikes are more popular than rice there.
  • inactive, on 07/08/2008, -4/+10A bubble inflated by our fed though the act of printing money.
  • zacharytelschow, on 07/08/2008, -0/+6"My hope is that the price keeps going up so as to cause a fundamental change in our petroleum-based society."

    Unless an alternative is found, the "change" you're referring to is simply a dramatic decrease in the standard of living.
  • darkened, on 07/08/2008, -0/+5Not running out, but running out of cheap $30 a barrel oil. The planet has plenty of oil it's just not as cost minimal to attain new sources as it was during the middle of the prior century.
  • SkippyDoorknob, on 07/08/2008, -1/+6This is destroying a lot of low income families who were barely getting along before. Now they can't afford to drive their small economy cars to work and can't afford the higher prices of groceries to feed their families. Be afraid of what you wish for. Just because you can afford it or have ways of cutting back doesn't mean everyone else does.
  • inactive, on 07/08/2008, -0/+5Hasn't this been said every year since the 1970s
  • mulling, on 07/08/2008, -1/+6If this keeps up, the next things to go up in price will be canned food, shotguns, and bicycles.
  • inactive, on 07/08/2008, -0/+5So use vegetable oil...
  • SkippyDoorknob, on 07/08/2008, -2/+7If they could keep a bubble from bursting then they would have kept the real estate bubble from popping
  • zacharytelschow, on 07/08/2008, -2/+7Bubles pop. This probably won't. With worldwide demand increasing and supplies remaining steady, prices will continue to rise. Bear in mind, as well, that if this was a speculation-driven bubble, there would be surplus supplies laying around. There aren't.
  • krische, on 07/08/2008, -0/+5Thank you for telling it like it is. Everyone seems to hop on the Armageddon bandwagon here. Give me a break, the US has survived plenty of wars, recessions, and even the great depression.

    I have a feeling all of the protesters of the Vietnam war and the farmers that lost everything in the Great Depression were saying the exact same things that these diggers are saying today.
  • GutterBall1200, on 07/08/2008, -3/+8Throughout history, the only real way to get filthy rich is to rob, steal and cheat the common folk. Just look at the Robber Baron's as examples [http://tinyurl.com/kn8am]. We see this today w/ Wall Street insiders. They need an industry/sector to exploit loop holes and cheat us. First tech, then housing, now oil and probably food commodities. Once one area is regulated, they will find (and/or with the help of legislation) a way to rob us. Otherwise, how much money can really make by being honest and hard working :-/
  • legendxx, on 07/08/2008, -6/+10How can this be? Diggers love to rising oil prices as evidence that the United States is doomed to come crashing down next month. What they don't understand is that everything about this country and the way it works is a cycle. Your common digger claims to be informed.. what he really means is that he reads every sensationalist article on digg and somehow believes he is given a clearer view of the world than that of any of your major news networks.

    You're all a joke. Open a history or economics book for once in your life and do a little research before making an asshat comment on digg about how the end of the world is upon us b/c of $4.15 gas prices.
  • duewydo, on 07/08/2008, -0/+4I think you are right. This is a bubble but its timing is poor, since the demand is increasing as we are reaching a production peak, or past one. So it may never pop just level out for a while before it baloons again. About your comment on surplus supplies, I remember listening to an NPR show about a year ago on how speculative pricing was limited because there is limited storage, but have since been reading more about how storage has been expanding. I wonder how that affects all of this...

  • krische, on 07/08/2008, -0/+4We've been making our own money since we've been a country. I fail to see your point.
  • kigcoopa84, on 07/08/2008, -0/+4If the dollar gets weaker then things don't appear to stabilize, the price goes up. Smart guy
  • marx2k, on 07/08/2008, -0/+4merlin, no one mentioned global warming.
  • Nubli, on 07/08/2008, -0/+4Supply and Demand are playing a large role in the oil price increase globally, but what is causing it to skyrocket in the US is the value of the dollar dropping as well.
  • hardD, on 07/08/2008, -5/+9I hope that the prices go down so i can get a SUV and not give a *****.
  • LokitheComplex, on 07/08/2008, -1/+5So you would trust 100 marketers as much as 100 scientists?
  • dinobot, on 07/08/2008, -2/+6I'm for it, as long as its not ethanol
  • Musicmonkey34, on 07/08/2008, -0/+3"faster than exponential rate"? I seriously, seriously, doubt that. Did they mean faster than ^2? Because ^999999999 is also exponential rate, yet gas still costs less than my house.
  • monkeyrun, on 07/08/2008, -0/+3lol analysts ARE just speculators.

    What do analysts do all day long, they speculate.
  • Aliwalla, on 07/08/2008, -0/+3Of course a CNBC analyst is going to say that, wall street/the city doesn't want to be told that its their fault we're in this mess. There is something like 150 billion USD betting on increases in the price of oil that's come out of hedge funds/pension funds/investment banks, you'd have to be either stupid or a liar with intrinsic interests in a higher price and no backlash against speculators to state that speculation hasn't had a massive impact on the price of oil over the past 2 years.
  • inactive, on 07/08/2008, -0/+3"Are We in the Peak of an Oil Bubble?"
    Yes, we are. Unfortunately the high prices will have induced a recession in the US. The best thing the Fed can to is raise rates 1/4 of a point. This will cause the dollar to rise and push oil speculators off the cliff. Long oil positions will unwind fast as short sellers start to smell blood. The effect of a rate hike on already anemic economic growth should be negligible.
  • Ransack, on 07/08/2008, -4/+7Keep dreaming. The oil is running out. We've already reached peak oil. Its only going to get worse.
  • BESTenemy, on 07/08/2008, -0/+3Asia is quickly surpassing us as the lead consumer of fossil fuels and they don't plan to slow down any time soon. They've got resource rich but capital deprived Russia to keep them company.
  • laserdog, on 07/08/2008, -0/+3Hrm the use of "Peak" in this write-up is highly confusing.

    What the article is saying is that they think the price of oil has reached a peak, not the supply.

    This has nothing to do with theory of "Peak Oil" (as I thought when I clicked through), but in fact is saying that evidence points towards the opposite, that this is a speculation bubble, and not a function of supply vs demand.
  • BESTenemy, on 07/08/2008, -1/+41930's saw the peak in oil well discovery in the US. 1970 saw the peak oil production in the US (with every following year more oil being imported to compensate for the lack of domestic supply). Today over 60% of our oil is imported. 2010 is marked by most analysts as the peak for global oil production. Some believe that we are already in it. Every following year cheap oil becomes rapidly less accessible. In order for the oil to be a viable source of energy it has to take fewer barrels to extract more barrels. We don't have to run out of oil completely, but simply have to reach the point where it's too expensive to extract, and that point is sooner than you think.
  • kaplanfx, on 07/08/2008, -0/+3The supply didn't suddenly change drastically between Dec 07 and now (a time during which oil prices have doubled). Sure we know that oil is exhaustible, but this sudden increase in price is based on people guessing at future supply and demand, and has little to do with current supply/demand realities. So yes, it is speculation, yes oil is an overprice bubble, and when future supply doesn't skyrocket as projected, cheap oil will flood the market.
  • marx2k, on 07/08/2008, -0/+3Unfortunately, I think you are absolutely right. I bet there's even evidence that can be found right now as to the correctness of your statement. I bet that any time there is an appreciable drop in oil prices or prices at the pump, even if it's for a week or two, there is an equal rise in gas guzzler sales.
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