The Oil Bubble

Some people think oil is not in a bubble.
Prices, by the mainstream, are always justified from rational analysis, bubbles are never factored in.
There are still such things as bubbles.
Where are they now? In commodities, in oil.

The current froth in the oil bubble has lasted about one year, since 2007. See the prices below.
One year for a bubble is not much.
The tech bubble and the real estate bubbles lasted longer than even contrarians expected.
To call the peak of the bubble at any one point is a very risky proposition.
In fact, in the midst of it, chances are higher that the froth will get worse than slow.
So oil, even without a war on Iran, and even in a recession might continue its bubbling up to 150-170-200 in price.
Shorting oil now is a risky proposition.
In 2008 we have major geopolitical risk and the election coming up in the US. The risk premium on oil will persist to these matters are settled.
Oil will be lower eventually, in a few years, but in the meantime expect a bumpy ride.
if you short oil make sure you short in long contracts, don’t try to call the top – you won’t be able to.

On the contrary we believe a long-oil speculation in Statoil Hydro to hold until January 2009 is an interesting proposition. The downside is limited, but the upside to oil frothing to USD 200 or a war on Iran is considerable.

Annual Average Domestic Crude Oil  Prices
1949-Present
U.S. Average
(in $/bbl.)
Year Nominal Inflation Adjusted 2007
1946 $1.63 $17.66
1947 $2.16 $20.75
1948 $2.77 $24.76
1949 $2.77 $24.99
1950 $2.77 $24.74
1951 $2.77 $22.93
1952 $2.77 $22.41
1953 $2.92 $23.40
1954 $2.99 $23.92
1955 $2.93 $23.47
1956 $2.94 $23.25
1957 $3.14 $24.00
1958 $3.00 $22.33
1959 $3.00 $22.11
1960 $2.91 $21.16
1961 $2.85 $20.48
1962 $2.85 $20.24
1963 $2.91 $20.43
1964 $3.00 $20.78
1965 $3.01 $20.51
1966 $3.10 $20.52
1967 $3.12 $20.10
1968 $3.18 $19.61
1969 $3.32 $19.45
1970 $3.39 $18.77
1971 $3.60 $19.10
1972 $3.60 $20.48
1973 $4.75 $22.80
1974 $9.35 $40.67
1975 $12.21 $48.71
1976 $13.10 $49.46
1977 $14.40 $51.02
1978 $14.95 $49.27
1979 $25.10 $73.60
1980 $37.42 $97.68
1981 $35.75 $84.58
1982 $31.83 $70.91
1983 $29.08 $62.74
1984 $28.75 $59.47
1985 $26.92 $53.76
1986 $14.44 $28.29
1987 $17.75 $33.56
1988 $14.87 $27.05
1989 $18.33 $31.75
1990 $23.19 $38.02
1991 $20.20 $31.86
1992 $19.25 $29.47
1993 $16.75 $24.92
1994 $15.66 $22.69
1995 $16.75 $23.62
1996 $20.46 $28.01
1997 $18.64 $24.95
1998 $11.91 $15.70
1999 $16.56 $21.30
2000 $27.39 $34.16
2001 $23.00 $27.92
2002 $22.81 $27.22
2003 $27.69 $32.34
2004 $37.66 $42.80
2005 $50.04 $54.99
2006 $58.30 $62.11
2007 $64.20 $66.40
2008 Partial $144
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One Comment

  1. Posted 8 July, 2008 at 10:08 pm | Permalink

    Follow the money, or just follow Jim Rogers.