tag:blogger.com,1999:blog-10549832.post5101198105776781019..comments2008-05-21T20:11:56.756+04:00John B. Chiltonhttp://www.blogger.com/profile/18208312356775869565uaeeconomist@hotmail.comBlogger3125tag:blogger.com,1999:blog-10549832.post-70002797465575060852008-05-21T20:11:00.000+04:002008-05-21T20:11:00.000+04:00When everybody is saying the fundamentals of a situation have changed, we have reached bubble territory. Fundamentals don't change in the course of a few years, they change over time, and im talking decades of moderate change. Oil didnt evaporate and demand didnt peak in the course of a couple of years. There are oceans of untapped oil reserves in the ground in a variety of different countries, but who cares about exploring extraction if there is no economic reason to do so.<BR/><BR/>China and India will begin to moderate oil intake because it is in their best interest to do so; they are already in the process of building reactors and the majority of the oil they use goes to energy production. China and India are also looking down the nose of a population shortfalls because of past decisions they have made in regard to childbirth regulation, as well as the fallout of their current "industrial revolution" society (use Europe and the U.S. as your paradigmatic reference for that). Oil will bust as demand starts to wane, mainly due to the beginning of a short global recession. Demand will definitely wane over the long term as third world countries approach first world status and populations decrease. That doesnt even take into account shifting to nuclear power in the United States and alternative energies that have finally come to a tipping point in most of the industrialized world.<BR/><BR/>Believe it or not there is a bubble right now, wait till demand actually adjusts and we end up with huge surpluses like there were in the late 1970's. This time there might not be people to buy up the excess at "normal" prices on the other end of it.speculatornoreply@blogger.comtag:blogger.com,1999:blog-10549832.post-65704569914081996702008-05-20T19:30:00.000+04:002008-05-20T19:30:00.000+04:00great posts lately on commodities, etc.<BR/><BR/>thanks<BR/><BR/>abbassAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-10549832.post-68386948708692239142008-05-20T14:49:00.000+04:002008-05-20T14:49:00.000+04:00And Arnold Kling is ignoring refinery capacities. When GW Bush went to Saudi and asked them increase their oil supply, the Saudis responded by increasing production by 350,000 barrels/day. In the grand scheme of things, this increase is symbolic more than anything. It's not that the Saudis don't want to help the Americans (that is irrelevant here). The matter of the fact is, production capacity is just not there!<BR/><BR/>So I would have to say that I would agree with Krugman. I don't think forward prices alone can be responsible for a bubble (or sustaining one).Dubai Entrepreneurhttp://www.dubaiplanet.net/noreply@blogger.com