Monday, August 11, 2008

Bubble Babble

Oh, they're having so much fuuuuuun! You'd think it was Times Square on VE-Day.

Four months to the day after oil passed $120.00 per barrel on an unstoppable climb it hit the latest - but certainly not the last - peak price of $147.27. Now, after a couple weeks of sliding it is back trading just under $120.00, a temporary respite before returning to its upward movement.

When oil first crossed the $120.00 barrier the press was full of articles about how devestating that price would be to the world economy. The world economy seemingly shrugged it off and adjusted to continuing rises in the price. The articles and headlines about the serious economic impact continued however.

When the price of oil dipped back under $120.00 a little over four months after it rose above that level for the first time the headlines were declaring that the good times had returned, that the bubble had burst, the stock markets climbed, the US dollar rebounded, we were on our way back down to oil prices of double digits, all was right with the world.... at a price that was considered the deathblow to the world economy just four short months ago.

Some writers were even so bold as to claim that peak oil was history, that peak oil had peaked, that the peak oil wing-nuts should crawl back into their caves. Clearly the market is in control of oil, not geology. I guess if you don't understand geology, don't bother to learn even the basics of geology, take all of your cues and information from economists and financiasl analysts you would have that point of view.

Those who understand oil geology, those who have studied the oil supply demand picture, those who have bothered to educate themselves in the underlying foundations of peak oil theory, those who know that M. King Hubbert and Mother Hubbard are not related, know that this is just a dip in the ongoing oscilation in price on the ever-upward trend in price that will accompany and follow the peak in global oil production. The prospect of $200.00 oil before year's end is still on the table. The likelihood if sub $100.00 oil is slim.

So to all of those who believe that $120.00 oil signals a return to the good old days, go out and check the tire pressure on your SUV, check the oil, check the battery, fill up the gas tank and get out there on the highway and have a rip-roaring good time. Enjoy the good times...... while they last.

1 comment:

AK Engineer said...

Good points - The "All Clear" has been sounded, it's a pity that we can only drive one barge sized SUV at a time.

I marvel at the collective lack of conservation. Even if oil was $9/barrel it is wrong to waste it.

It's also strange to think of $114/bbl as "cheap".

Stay tuned, geology and market economics will win - probably sooner than we think.