I was right - again. Oil price was another bubble, after housing

Occam's Razor - the simplest answer is usually the best.

AmericanGoy: So why are gas prices rising?, dateline May 27, 2008.

The answer for me then was simple... speculation.

I cut through the bullshit on TV and in print and on radio so common then (and still common now) that oh my goodness, the emerging economies of India, China are generating sooooo much greater demand for oil.

Others were bringing up warfare in Africa as affecting oil prices.

In response, I put forth Mr. Masters testimony, who spilled the beans before Congress that yes, indeed it is rampant speculation which was to blame for the meteoric, out of this world, insanely rapid rise in the price of oil.

I wrote this at the time:
"There is no underlying cause for the price of oil to be so high. None. No logical reason WHY it is so high."

Put simply, it was another bubble.

Just like the housing bubble going pooooof right now, the oil bubble, propped up by endless buys from the speculators who saw it as quick profits after the housing bubble went pooooof, is also coming to an end.

I was happy to see an article on this topic on bloomberg.com, World Is `Drowning in Oil' (Again) After Drought: Caroline Baum, dateline Oct. 28 2008.

Three months ago, the world was running out of oil.

Seriously. I kid you not. Everywhere you turned, you heard whispers that the day of petroleum reckoning was at hand.

Now there's too much oil, prodding OPEC to cut production targets for the first time in two years. Last week, the Organization of Petroleum Exporting Countries, confronted with the halving of oil prices since July, announced a 1.5 million barrel-a-day cut in output.

World markets greeted the news of reduced oil supply by pushing prices down further. Crude oil fell $3.69 a barrel Friday to $64.15. Yesterday, oil dropped another 93 cents to $63.22, a 17-month low.

How quickly things change. Or do they?

All speculative bubbles have a kernel of truth behind them to justify their existence. This time around it was China and India. These emerging Asian giants were gobbling up all the commodities the world could produce to fuel their rapid industrialization.

It wasn't that the story was untrue; it was old. Growing global demand probably was the reason for the gradual rise in oil prices from $20 a barrel to $40 earlier in the decade, and even to $60 by mid-2005.

It was the moon shot to $147 that took on a life, and a litany, of its own. Emerging nations didn't start gobbling up crude, coal and copper all of a sudden in the middle of 2007.

"It wasn't that the story was untrue; it was old. Growing global demand probably was the reason for the gradual rise in oil prices from $20 a barrel to $40 earlier in the decade, and even to $60 by mid-2005.

It was the moon shot to $147 that took on a life, and a litany, of its own. Emerging nations didn't start gobbling up crude, coal and copper all of a sudden in the middle of 2007."

Thank You, miss Caroline Baum.

Yet analysts on TV and in print told us with a straight face that the doubling in oil prices from July 2007 to July 2008 was a result of fundamental demand, not speculative buying or investors, including pension funds, ``diversifying'' into ``alternative investments'' in search of ``uncorrelated returns.'' (It sounds a lot better than admitting you got suckered into buying what was going up and are now stuck with a pile of stuff that no one wants.)

Strong language.

Almost as if we were related.

``It happens in every market,'' says Michael Aronstein, president of Marketfield Asset Management in New York. ``Once it goes up an enormous amount, creating unfathomable wealth for the fortunate participants, someone makes an ex-post case as to why we are only at a beginning and it's not too late to get in.''

This advice is ``generally formulated by someone who has a vested interest in selling the stuff,'' he says.

Funny.

Do you think that the people on TV with the idiotic explanations on how the price of oil was due to the growing demand (which, according to them, went up, what, 50% in a few months - just L O L) and not to market manipulation...

Do you think that the "experts" on TV had a vested interest in keeping the oil bubble going after the housing bubble burst?

Hmmm?


So now lets think of the simplest explanation, Occam's Razor and think about the bailout.

The bailout... the government takes taxpayer money - MY MONEY - and gives it to various corporations, no questions asked, no rules set... because otherwise the sky would fall and we would all live in a 'Mad Max' world.

So what words come to mind to you?

Mine are... swindle.... con.... theft.... the biggest financial crime in the history of the world.

Good night.