Tuesday, August 12, 2008

Oil, Bubbles, and You...

Yeah, it was just a bubble. Crude oil prices weren't skyrocketing as fast as they were because of actual demand. They were doing it because of overreaction to some increased demand. A few economists called this one but economists are a bit like Nostradamus or sports commentators: they say lost of stuff and some of it actually pans out. How do we know it's just a bubble? A very large and important oil pipeline is now in a war zone and it didn't do anything to stop the falling of crude oil prices. This is an emperor-has-no-clothes moment. The dollar is getting stronger, Europe is slowing down some, and the Olympics being in China is going to leave them in a recession afterward just like very other country whose economy depended so much on Olympic-based growth. Investors are going to start abandoning commodities like crude oil as a safe bet and a lot of the people who got into crude late in the game are going to lose their shirts off their backs over it. We'll soon go back to our gas guzzling ways and the question of domestic drilling will go back to "if" from "when." We'll probably end up with higher gas prices than we had a few years ago but it won't be close enough to the magical $4 mark automakers have determined will seriously impact vehicle choices and usage in the long term. And worst of all, people will start taking their boats out on the lake again. I was really enjoying the solitude out there.

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