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Why do some people refer to the current price of oil as a "bubble"?

Name: Leslie R. Lee
City & State: Los Angeles, Calif.

Question/Comment: Why do some people refer to the current price of oil as a "bubble"

Paul Solman: Because the nature of bubbles is that they inflate, but inevitably pop. Those who refer to the "oil bubble" expect the price to drop dramatically, as has often happened in the past when something quadruples in price in just a few years, as oil has done. "Bubble" is, in other words, a metaphor.
Meanwhile, we don't know if there is an oil bubble, in the way we think we know there was one in Internet stocks or in housing, because prices did pop in both instances. As I write, they have not yet done so in oil.

-- Posted July 31, 2008 | Comments (0) | Permalink