Oil Bubble

Note: This first ran 08/06/2008, links no longer work. For fun, look at the date oil peaked and the date my first Energy Article ran.

New York— (People Port) A financial commentator, CNBC's Melissa [Francis]floated the Oil Bubble Bursting idea today. Her ever changing panels did not go along with that idea. Somehow a 20% decline in the price of oil and the absence of market liquidity at any price did not meet the panel members's idea of a bubble.

Asked the Treasury Department on Monday for a comment on what some were calling a melt-down in the commodity markets. The stock market held its own. When the rules covering the oil market were changed eight years ago to allow you and I to hedge our future oil needs. We may have went too far. Senator Reid has said as much.

From 2003 to 2004, Oil prices increased 37 percent. Spot price for Brent Crude closed at $40.38 on Friday 12/31/2004. Gasoline was $1.91. For most of the world, it was a huge increase. It sparked China and India going head to head to close energy deals. See for most of the world, what Floridians call rolling blackouts (cold spell), are part of everyday life. As oil zoomed up, those blackouts grew longer. In India today, there are areas that experience 14 to 22 hours, even for utility paying customers. In India blackouts are called load shedding.

China has the same problem. The higher the price of oil, the less that is used. India now embraces that nuclear deal we struck with them. If we gave them a dozen, that may take care of their current needs. China, like the US, saw those high prices and took action. They implemented a ten year plan in 2006. A good portion is dedicated to wind. They achieved their goals in three years. Today, instead of fighting India, they are cooperating. Most of those windmills were made in India. In China, it is a little easier than in India to build wind farms. China can push through the needed local acceptance. Harder to do in India. Wind farms are noisy.

Here, our own people are pushing through wind projects. Right now we produce twice as much electricity from wind than China. India thinks, She will surpass China. If she had enough electrical power plants, she could. Much of the world, is switching to natural gas to power their electric generation. That Iran to Pakistan, to India, to China, natural gas pipeline would help. Right now, the gas will not be coming from Iran.

In 2005 we felt Hurricane Katrina. We also saw $4 gas. The self perpetuating, in this case oil market, increase in price. More investors want a piece of the action. Which keeps the price up, Someone was willing to buy it at that price. This attracts more investors. Oddly enough, this behavior tends to lock out true innovators because their new firms, story, does not sound like most of the others. The first one I know of, the Tulip Craze in Holland. Had a small service firm when the markets crashed in the 1980s. One of my accounts, fancy restaurant downtown, explained his business slowed. I made a suggestion first then asked, what had changed. Within a three month period of time the occupancy rate in those office buildings had dropped to 25%. I thought he meant vacancy. No, occupancy. Everyone moved their offices to their homes.

It did come back, Miami, only took a year. The wind farms springing up all over the US are driven by the tax break. Solar heating has tax breaks. That industry, like most, depend on the suppliers to get the word out to their customers. We do not have, billion dollar solar power projects, yet. Our solar R&D industry is clicking away. They are moving solar forward at light-speed. Many are leaving, going into business for themselves. Let's pray they all receive financing.

Speculators have run up the price of oil in a very big way. Two dollar gasoline is expensive.

Copyrighted, 2008, J John Swanko, All rights reserved. This work is licensed under a Creative Commons Attribution 3.0 United States License Permission is granted for web based usages; the internal links must link back to store. For more information Click