Gas price "bubble" could burst

[afmo]

http://www.mercurynews.com/help/ci_9542957

According to oil industry analyst Stephen Schork, Behrens and Acebo are right on track.
"Absolutely it's a bubble," Schork said. "Crude oil prices have risen steadily from November 2001 until September 2007. Prices rose $60 — from $20 a barrel to $80 a barrel.
"Then, from September up until today, in just nine months, prices rose another $60 a barrel." Such a precipitous rise is the mark of a bubble, Schork believes.
Also, "People are cutting back on their demand in the United States and Europe," Schork said. (Indeed, on a state level, after 14 straight years of increasing energy consumption, Californians are using less gas, the State Board of Equalization has reported.)
"You have demand destruction and yet rhetoric is about how prices can only go higher," Schork said.
This is another sign of a bubble, because usually demand is what drives prices up. Since demand is down, the price rise is artificial, caused by speculators buying and driving up prices.
The bad news is that oil will continue to go up, Schork believes, to $150 a barrel or even higher. "If that happens it would imply gas prices well over $5 a gallon in Northern California," he said, with a national average around $4.89.
"It's going to happen at some point this summer. I think once the market has achieved that magical number we will see a material correction," Schork said.

I've been playing the optimistic role, and i've said as much here before that gas will burst at some point, looks like analysts are starting to have the same feeling.

[longtalltechsan]

Hmmm, wouldn't it be so much better to decrease our dependence on a world oil market and "roll our own"?

[afmo]

Originally Posted by longtalltechsan

Hmmm, wouldn't it be so much better to decrease our dependence on a world oil market and "roll our own"?

yep, but you know better than that...it'll never happen.

[KEVWYO]

Originally Posted by afmo

http://www.mercurynews.com/help/ci_9542957



I've been playing the optimistic role, and i've said as much here before that gas will burst at some point, looks like analysts are starting to have the same feeling.

I'm hopeful that gravity will affect the rise in oil as much as it affects everything else in life.

[trik396]

Demand went up over 15% last year in China. This year it will top that PLUS they estimate another 8-10% due to the earthquake and massive undertakings because of it.
Demand isn't going anywhere but UP!

[Brickboy240]

That "bubble" logic is VERY wishful thinking.

Could prices on a barrel drop as fast as they rose? Sure, anything is possible...BUT...will the demand by the US, Europe and other developed nations decrease faster than the demand for oil in China and India will rise?

THAT is the majic question...one for which I nor anyone else really has a crystal ball to predict.

Prices will go down at the end of summer...but I really doubt the "bubble burst" that some overly optimistic speculators are sugesting.

I know...I know...I am usually a very "glass is half full" sort of guy, but I work in this biz and I have to also be realistic at the same time.

My advice to you: as always...learn to live below your means (so that rising prices don't beat you up so badly) and don't run out and buy a Hummer or big gas burner and hope for 2 bucks a gallon again.

- brickboy240

[trik396]

$2 a gallon is a fantasy that ain't gonna happen. Everyone should get used to it. Matter of fact, I see $7-8$ per gallon in the next couple or three years. What do I know though...? Just been following oil stocks for better part of the last decade.

[Brickboy240]

The people I talk to in this business - ones that have been in the Exxon corproate office for decades or work at the BP and Crown refineries, all say that Obama's big plan for oil taxation will almost guarantee 10-15 dollars a gallon and create huge shortages.

Seriously!

Their rationale is "why should we go all out and increase output as demand rises, when the govt. is just going to take away any gains we make and continue to punish us?" Economics 101 class would tell you that this kind of action would result in....you guessed it...shortages. Shortages in a time for huge demands means....yep...huge price increases!

There are also big rumblings at Exxon's corporate office, about moving their corporate office to Dubai in the future if Obama and like-minded elected officials keep making it more difficult for them to conduct business in the USA. You know, if one company does it...they all will. Can you guess what THAT might do to our economy?

Its hard to imagine that Obama and his inner circle went to Ivy League colleges. You would think that paying that much for an education would yield better results...but maybe not!

- Brickboy240

[longtalltechsan]

Brickboy, you know it, I know it and most of us here know it. However, there are far too many people in this country who are infatuated with Obama because he talks well. Big freakin' deal. Too many see him in this light:

[KEVWYO]

Originally Posted by Brickboy240

The people I talk to in this business - ones that have been in the Exxon corproate office for decades or work at the BP and Crown refineries, all say that Obama's big plan for oil taxation will almost guarantee 10-15 dollars a gallon and create huge shortages.
- Brickboy240

I agree that the windfall profits tax thing he is talking about is a crappy idea. I wouldn't be oppossed to government lifting impediments to greater refining capacity or production or putting the political pressure on oil to do the same.