What’s happening now in the oil markets reminds me of what happened in the housing market after the tech bubble crashed. There were some fundamental changes that were happening in housing: baby boomers buying second homes for retirement, an increase in immigration, and changes in the tax law. But there was also excessive speculation, with TV shows like “Flip this House” marking the phenomenon. Yes, land, unlike stocks, is a limited resource. But as we are learning with the housing crash, the fundamentals did not support the rapid price run-ups.
Speculators are now playing an increasing roll in commodities futures contracts. The number of speculators who have no intention of taking possession of a barrel of oil has more than doubled since 2000. Oil is the most obvious choice for investment managers looking to hedge the decline in the U.S. dollar. Yes, there is a limited supply of oil. Yes, demand from developing nations is increasing. But it’s hard to see what has fundamentally changed since oil was $85.00 a barrel.
Comments
This commentary is typical of those uninformed about physics, the second law of thermodynamics and misinformed by neoliberal economic thought.
We are entering a new phase of energy and oil supply. If we continue to act as pollyana's about the future and ignore the physics concept of closed systems and ecological carrying capacity we are on a fateful track.
Stephanie needs to read a little physics and ASPO and its spin offs.