Quote:
Originally Posted by JoeRedskin
Just recently read an article on the "oil bubble" comparing it to the "housing bubble". While there is speculation driving the price, there is an underlying increased demand from developing countries (particurlarly, as Schneed has repeatedly pointed out, India and China). Thus, while there may be some easing in the future as the market cools down, it is unlikely to "burst".
IMO, it appears to be a confluence of events and market forces that is making a resource, that had been vastly underpriced, reach its market price. It will probably overshoot and then ease back (my guess it ends up around 4.50). Prior to this latest spike, how many people (other than those who drove for a living) actually budgeted their weekly gas expenses? Doesn't that suggest to you that it may have been a bit underpriced?
The price now is beginning effect people and changing their habits - to me, that is an indication that it is reaching a price close to its free market level.
[BTW - Just to indicate how the gas prices are affecting us - now, b/c of our driving needs for commutes and such, we have actually added "gas" as a separate line item in our budget where previously it was part of discretionary spending.]
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I think it was definitely underpriced in the 90s when it was under a dollar. When you figure in Fed and State taxes, it was practically free. (I think oil was around $13 a barrel.) So, that was never going to last, but I don't think demand has increased proprtionately with the increase in price. I think there are other factors at work.
Wether or not to extract oil from ANWR has reminded me of a joke that the late Senator Howell Heflin of Alabama told on Ted Kennedy some while ago. Senator Kennedy was photographed on his boat with some young women and Heflin remarked, "I guess Senator Kennedy has changed his position on offshore drilling." Hilarious. Get well soon Ted. We want you live to be at least 100.