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Oil Prices: It’s not a bubble!

Posted May 28, 2008

“Yes, oil is overbought. Yes, oil is going to correct at some stage. But let’s get this clear - it’s not a bubble.” — Dominic Frisby

Blogger’s note: Dominic Frisby had some great commentary on our current record oil prices in a recent Money Morning (UK) message to his subscribers. Dominic is from our London affiliate MoneyWeek, and the situation on the other side of the pond has given him an interesting perspective on the oil bubble question.

by Dominic Frisby

Baltimore – (TFN): Thank goodness for MoneyWeek, that’s all I can say. Because, aside from a couple of noble souls at the Daily Telegraph, nobody else in the mainstream media gets it.

I listened to various experts talk for over thirty minutes on Radio 5’s afternoon show last week about the high oil price. Not one mentioned Peak Oil. Not one mentioned out-of-control money supply. Not one mentioned increasing Asian demand…

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Yes, oil is overbought. Yes, oil is going to correct at some stage. But let’s get this clear - it’s not a bubble.

Then we had Anatole Kaletsky in The Times tell us the rising oil price ‘threatens to do far more damage to the world economy than the credit crunch.’ He’s right about that. Unless of course you’re long of oil in some form or other, in which case things are looking rather rosy.

Kaletsky goes on, ‘The present commodity and oil boom shows all the classic symptoms of a financial bubble, such as Japan in the 80s, tech stocks in the 90s and, most recently, housing’. But does it?

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In a bubble supply overwhelms demand, yet prices continue to rise. In the 1990s tech companies with no earnings issued masses of stock. In the US housing boom-bust, builders built everywhere and there was an oversupply of inventory. Is there an oversupply of oil? Read on to learn more and find charts of oil supply versus demand.

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Posted by Dominic Frisby · Filed Under Oil and Energy 

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