12 2 mins 14 yrs

I am sure that we will all have been feeling the pain of the massive fuel price hikes over recent months. 

Here’s the good news: the oil price did not zoom upwards in response, not a blip, barely a flicker. Actually the price of a barrel of crude has been falling: from a peak of $145 in early July, it came down to $117 and was trading yesterday at $120. That’s almost a 20 per cent drop in little more than three weeks. If the trend continues into September at anything like the same rate of descent, most of the inflationary spike of the past 12 months will miraculously have been sliced away. This is a dramatic reversal, and it is worth trying to work out why it is happening and what it means. Just possibly, it means that what investors refer to in shorthand as the great “oil up” story has finally revealed itself not as the fundamental reflection of scarce supply that its adherents liked to claim, but as a simple, speculative bubble that was always going to burst.

Burst is will do, as the reality of the supply hype is revealed. With a  bit of luck prices will continue to fall closer to the $60-80 range in the months ahead and that in return will ease UK inflationary pressures.

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12 thoughts on “HAS THE OIL BUBBLE BURST?

  1. The past "spike" in oil prices was contrived and supported by oil futures speculators and the large oil refining companies.

    In the past year they have reaped Billions of dollars at the expensive of the motoring public.

    Don’t complain to the politicians, however. You’ll simply get a shrug of the shoulders and a nod of the head.

    The motoring public has TWO options:

    1) Open revolt (I doubt it)

    2) Suck it up and get on with life (pity..thats reality!)

  2. I do expect a steady decline to the $80 range, barring some major news like an Iran war.

    But that changes nothing as respect the need to develop more oil, aggressively invent and deploy new technologies, and to conserve, esp in America, where there is astonishing and stupid energy waste everywhere.

    Even if the price of oil went to $20 a barrel, I don’t want any of my money going to bad countries like Iran, Saudi Arabia and Venezuela.

  3. supply and demand is the fundemental law of our world. Demand is increasing daily while tapping the worlds supply of this self renewing commodity is trying to be blocked by those that believe in the fantasy of global warming.

    Drill here, drill now, drill through a polar bears head if it’s lying where the oil is.

  4. "this self renewing commodity"

    I hope you’ve patented that self-renewing oil of yours Troll.

  5. yeah frank it’s called the Abiotic oil theory which was proven by the russians decades ago.

    But of course a man who believes the breath he exhales is heating the earth would still think he’s running his car off of dead dinasors, oh wait that’s right you only ride a bicycle don’t you.

  6. Troll,

    "yeah frank it’s called the Abiotic oil theory which was proven by the russians decades ago."

    Ah of course. LOL. Well that seems to be the complete set – between you, David and Pete it seems that there is hardly any aspect of chemistry, biology, physics, or geology that mainstream science got right in the last couple of hundred years. It really is amazing that anything they built using those wrongheaded ideas works.

    I would really love to see you guys apply your version of science to some task, like building a spaceship, or a car, or hell a bicycle now you mention it. I would just love to see what kind of square wheeled contraption you would come up with.

    Seriously if you ever attempt this please post a video on youtube.

  7. Frank just as with global warming you take one side and run with it.

    Biotic oil the theory that oil comes from decaying matter was never fully accepted even at its inception. Over 100 years ago. (now mind you I know that facts that have been acquired over the past 100yrs mean nothing to you)

    Both theories are just that theories. Over the past 50 years the evidence has re-enforced the abiotic theory rather than the biotic one.

    Oil is the natural biproduct of the earths own thermal geological processes.

    Just as decades ago the "concensus" was that the Earths core was lead or iron today it is believed that it is more likely uranium.

    The more our science and technology advances the more we discover that what we were taught in grade school as gospel was wrong.

    Some of us grow and learn you represent the others.

  8. Dont get too excited yet. while we might see up to a 40% drop (due to the speculative bubble, mostly institutional investors), the supply issue will still not go away. Demand may be retarded slightly but the structure of the world economy (ie infinite growth) will eventually turn that around.
    What the naysayers always miss conveniently avoid in the peak oil debate is that almost all major oil regions have already peaked. Saudi Arabia is one of the only producers that, if they are to be believed, hasnt. Either way, it is plainly obvious that all is not right with oil production. New emphasis on regions like Alaska and the Artic should provide ample evidence that current sources are insufficient. The other evidence is that many major world events pivot around energy security. Iraq, Venezuela, Darfur, Nigeria, Iran, Kosovo, Georgia/Ossetia.

    Anyone who claims, like Troll, that all is well in the world of Oil, is quite frankly off their rocker. Though, considering Oil=Bedrock of US monetary system its not surprising people seek solice is such wishful thinking. Abiotic Oil LOL.

  9. Abiotic oil is a minority theory and therefore is more likely to be wrong than right, and it certainly shouldn’t the basis of our energy policy as Troll suggests, but it isn’t some crank theory on a par with creationism or hollow earthism.

    We know that hydrocarbons can be formed without life because they have been detected in deep space.

  10. Ross,

    " it isn’t some crank theory on a par with creationism or hollow earthism."

    It is however a favorite theory of cranks, and the version of it they put forward is invariably a crank theory.

    Such as the version of reality in which there are some russian scientists who have ‘proven’ it decades ago.

  11. even if the theory proves wrong the existing PROVEN oil fields inside the US hold enough Oil at current consumption rates for 500 years.

    I think even if it is limited to just whats there now (which I disagree with) that should be enough time to find an alternative.

  12. even if the theory proves wrong the existing PROVEN oil fields inside the US hold enough Oil at current consumption rates for 500 years.

    Much of it is Shale oil. Which takes bundles of energy to convert to usable barrels of actual oil. So while it maybe on some level true that there are 500 years worth of oil under the ground, it doesnt equate do 500 years of recoverable usable oil. Its all to easy to convince yourself that all oil is the same when under the ground. Its not, and Shale Oil in particular, from what ive read, is vastly different from sweet light crude.

    Peak oil is not about all oil running out, its about the easily extractable and easily refined oil running out. I would thank that recent interest in ANWR shale oil shows that we are probably headed towards that eventuality.

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