Oil price bubble?

[accent]

I think I am on pretty firm ground in saying domain prices have dipped in recent months, and in saying that the overall world/USA economies are to blame. One of the largest factors in the global decline is the price of oil, which has doubled in the last year.

I have already mentioned that I believe that oil prices are behaving like a speculative bubble. Here is a column by a writer who agrees:
http://news.yahoo.com/s/ap/20080531/ap_on_bi_co_ne/all_business;_ylt=Aki7THbeJuF_hkqIYNxDYcib.HQA

When buyers flock to a market that they know little about, and prices are increasing far more quickly than demand would justify then it is a clear sign that the top is near.

"The rise in price of oil has weakened demand for the physical commodity, but it has boosted demand for the financial commodity since more investors are chasing returns," said Jeffrey Kleintop, chief market strategist at LPL Financial.

In the last five years, investment in index funds tied to commodities has grown from $13 billion to $260 billion, and the price of the 25 commodities that compose those indices have jumped 183 percent

..... data showing annual Chinese demand for petroleum, based on government figures, has increased over the last five years by 920 million barrels; over the same time frame, the increase in demand for petroleum futures almost equals that at 848 million barrels.

 

[Rubber Duck]

Before making prediction about the future just take a moment to check your understanding of the past is vaguely correct.

http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/commodities/28698/twelve_month.stm

 

[goodkarmaco]

There is some speculaton in oil prices. The main reason oil has doubled the last year is the U.S. dollar has lost 40% of its value in about the last year. Simply put, the Saudis don't want our U.S. $60.00 for a barrel like a year ago. They know the dollar, once the pride of the world has lost almost half its value, so they are demanding twice as many dollars for the same barrel.

Of course government likes to blame the oil companies as that takes the spotlight off helicopter Ben.

 

[Rubber Duck]

There is some speculaton in oil prices. The main reason oil has doubled the last year is the U.S. dollar has lost 40% of its value in about the last year. Simply put, the Saudis don't want our U.S. $60.00 for a barrel like a year ago. They know the dollar, once the pride of the world has lost almost half its value, so they are demanding twice as many dollars for the same barrel.

Of course government likes to blame the oil companies as that takes the spotlight off helicopter Ben.

Put even more simply. The US is no longer able to manipulate the Oil market in the way that it has done for the last Five Decades. OPEC was really only ever set up to try to counter undue control over the market excercised by the US in the first place, but what had really always been missing was sufficient alternative buyers. They don't have that problem anymore, so no it is whatever the market can stand. Yes, and they will want to be paid in hard currency.

 

[-REECE-]

Hard currency... You mean not US dollars? :hehe: :sold:

I think Oil prices are going to go Up, Up, Up -- maybe not in real terms/versus the Euro, but certainly versus the USD imho.

Put even more simply. The US is no longer able to manipulate the Oil market in the way that it has done for the last Five Decades. OPEC was really only ever set up to try to counter undue control over the market excercised by the US in the first place, but what had really always been missing was sufficient alternative buyers. They don't have that problem anymore, so no it is whatever the market can stand. Yes, and they will want to be paid in hard currency.

 

[treebytheriver]

There is some speculaton in oil prices. The main reason oil has doubled the last year is the U.S. dollar has lost 40% of its value in about the last year. Simply put, the Saudis don't want our U.S. $60.00 for a barrel like a year ago. They know the dollar, once the pride of the world has lost almost half its value, so they are demanding twice as many dollars for the same barrel.

Of course government likes to blame the oil companies as that takes the spotlight off helicopter Ben.

Great post. They can charge whatever they like, and they will.
Time to ride bikes, and think about alternatives.

 

[Rubber Duck]

It could actually get worse than that. As many oil suppliers effectively have scores to settle, the US could find it competitors locked in to favourable long-term contracts whilst it is having to pick up a great deal of its needs on the spot market.

 

[bmugford]

I know it is painful at the pump right now, but in the long run the surge in oil prices could spurn the innovation that is needed to get out of this mess.

During the surge in the early 1980's the price of a barrel dropped from $38 to $8 after the US started towards producing Syngas, which is a cheaper way to convert Coal to Gas. It is still a much cheaper alternative.

Maybe, at some point the Congress will realize handing subsidies out to oil companies to do research isn't the best idea. When Exxon is making $40B/year in profits I think they can afford it on their own. Not to mention why would it be in an oil companies best interests to come up with innovations that could put put them self out of business. This is like trusting John Gotti to clean up the Mob.

 

[Rubber Duck]

Yes, but in many respects the US is already a decade behind the main competition. Why do you think you are buying more fuel efficient cars from abroad?

I know it is painful at the pump right now, but in the long run the surge in oil prices could spurn the innovation that is needed to get out of this mess.

During the surge in the early 1980's the price of a barrel dropped from $38 to $8 after the US started towards producing Syngas, which is a cheaper way to convert Coal to Gas. It is still a much cheaper alternative.

Maybe, at some point the Congress will realize handing subsidies out to oil companies to do research isn't the best idea. When Exxon is making $40B/year in profits I think they can afford it on their own. Not to mention why would it be in an oil companies best interests to come up with an alternative fuel and put them self out of business.

 

[bmugford]

The US is more than a decade behind no doubt. Countries like Brazil saw this coming years ago and now have no issues with this at all because they took the steps necessary ahead of time instead of reacting to it after the fact.

Yes, but in many respects the US is already a decade behind the main competition. Why do you think you are buying more fuel efficient cars from abroad?

 

[Rubber Duck]

The problem is low Gasoline Tax.

In countries where tax on oil products is high, the need to conserve them has been most acute and that has spurred innovation.

The US economy has been left highly dependant on the imports of cheap oil and is therefore inherently much more unstable than its competitors. The Domestic Airline Industry is on the brink of collapse and the automobile is in a complete mess.

Even Boeing is going to suffer despite is efforts to innovate as much of its customer base is on the brink of going to the wall, and even more fuel efficient aircraft should they ever arrive is only one small part of the overall equation.

Bush is alright though. His most energy intensive toys are Nuclear Powered!

 

[labrocca]

I heard a GREAT keyword on the news today...

hypermileage...

I SHOULD have run to the computer immediately but was distracted. I checked a couple hours later...the .net and .org were just snagged. The com was already taken a while ago. So I grabbed the info ($.99 at Godaddy).

There are going to be a lot of domainer opportunities with energy, gas, and automotive domains if you can be creative and watch for new words.

This thread is inside "domain discussion" but it's headed more toward a general topic. Let's discuss domains here.

 

[Mark]

I'm investigating an Alternative energy myself - "Politician Power" !

First you get a politician ... Second you'll need a Cattle Prod ..... Well - You see where this is going Be Creative :blink:

 

[holyroller]

I agree with accentnepal about it being a speculative bubble, although it is impossible to say if it is nearing the top. A lot depends on how many more dollars bernanke and his side kicks can print.

It is the increase in money supply (in US and around the world) that is fuelling much of the price rises. If they keep increasing money supply at the rate they are, there will be twice as many $'s in existance in 5 years time. This is causing a bubble in not only oil, but most of the other commodities as well.

 

[interestedenough]

Energy Hype

I agree with AccentNepal that the way the oil/energy markets are behaving we are definitely a kind of bubble.

Also agree with goodkarmaco and Rubber Duck that the exacerbation of what we see here in the US has to do with the devaluation of the dollar with respect to other currencies, and the low gas taxes on oil-voracious countries like the US are partially to blame for high prices of oil.

But nevertheless, it is a Bubble, but who knows what is going to burst it? Global economic slowdown due to high oil prices? Development/proliferation of alternative energy sources to oil? All of the above? Who knows how long this is going to take?

On this regards I've done what I can in relation to the bubble: I drive only as necessary the most efficient car I can, try to consume less electricity, AND of course I have bought a couple names relating to the oil/energy bubble for quite a while and I think I have waited too long to develop them. :kickass:

 

[Rubber Duck]

I agree with accentnepal about it being a speculative bubble, although it is impossible to say if it is nearing the top. A lot depends on how many more dollars bernanke and his side kicks can print.

It is the increase in money supply (in US and around the world) that is fuelling much of the price rises. If they keep increasing money supply at the rate they are, there will be twice as many $'s in existance in 5 years time. This is causing a bubble in not only oil, but most of the other commodities as well.

That is not a bubble that is quite the opposite. It is the dollar that is imploding.

 

[GILSAN]

In Europe gas is between $9.00 - $11.00 a gallon, depending on the % each government taxes on petrol. European Cars are suposedly about 10% more efficient than US Cars.

There are many solutions out there but it requires changing life styles and strong government policies.

Speculation accounts for about 15-20% of oil prices. Get rid of speculators and you imediately have a massive drop in oil prices!.

Here's another interesting solution that apparently should start coming out next year!

A car that runs on Compressed Air!

Air car from France
http://www.youtube.com/watch?v=D-A3XHFT5qc

The Air Car - zero pollution and very low running costs
http://www.gizmag.com/go/7000/

A car that runs 200 miles on compressed air.
http://www.youtube.com/watch?v=ztFDqcu8oJ4&feature=related

Air Car by Guy Negre on CNN
http://www.youtube.com/watch?v=f4w6aJMNXSk&feature=related

GIL

 

[Rubber Duck]

May be it is difficult to make like for like comparisons because Americans have typically bought bigger heavier cars but I would think the difference is far higher than 10%. Europe import far less oil than the US and has a population nearly half as big again. The US economy is incredibly wasteful for what it actually produces.

 

[GILSAN]

May be it is difficult to make like for like comparisons because Americans have typically bought bigger heavier cars but I would think the difference is far higher than 10%. Europe import far less oil than the US and has a population nearly half as big again. The US economy is incredibly wasteful for what it actually produces.

The US has 1/20 of the world's population, but uses 1/4 of the world's oil. Those numbers speak for themselves.

Europe has more population than the US (340 million). All of Europe (including European Russia and former comunist countries) has 730 million. The European Union has about 470 million.

You are right about the US being incredibly wastefull. The successive US governments have had no courage to implement strong energy conservation policies. There's such a massive pool of talented people in the US that it boggles my mind that you can vote for Bush on 2 occasions and now you have a choice of 3 mediocre candidates for president again. Mind you we have that same problem here in Portugal as well. A whole bunch of useless and corrupt politicians.

GIL

 

[Sam]

if i were you, i would put 10k in futures that project a loss. HIGH HIGH probability the price will eventually fall below the current price.

I would also highly recommend any American to get an overseas bank. I might soon get one with HSBC and deposit my money in EUROS and store them in euros.