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Your graph is wrong. You say the oil bubble has is 2,391 days but your graph shows it is only around 1,650 days.



Sorry about that. The days in the chart are trading days and the days in the text are calendar days.

San Fran Sam

I know every time a bubble is created someone out there always says "This time it's different." And they are always wrong.

However with oil while it may be a bubble I don't think that the correction will be on the order of the tech and homebuilders.

Oil is a non-renewable resource. That is, limited supply. The homebuilders overbuilt and overbuilt. Increasing supply. Same with tech. Profitless companies going public increasing supply of stock shares.

Less public participation (to this point in time) in the oil speculation. Homebuilders and tech were driven by massive public speculation. In tech in the stocks themselves. In the homebuilders, by house flippers.

What caused the bubble to burst? In tech, it was a growing realization that there were no profits supporting the stock prices. The fools rushed to the exits.

In the homebuilders, it was rising interest rates affecting adjustable mortgages. Tightening of credit for house purchases. Cutting off demand and leaving a large unsold inventory.

What could it be for oil? Certainly a recession (global or US0 will decrease demand temporarily. But long-term growing demand in Asia and again limited supply. It just seems that oil can't fall that far for too long.

What the high prices could do is to build in a mentality toward energy efficiency. Such that even if oil prices drop, the demand for oil won't rise to pre-bubble levels. For example, if the CAFE milage increases by 10%-20%, those vehicles are on the road for a long time. If the price oil and gas suddenly drops, people won't rush out and buy gas-guzzlers right away.

It took a long time in the 80s, for the lower price of oil and gas to result in the demand for SUVs and other lower gas mileage vehicles to arise.

I've rambled enough. I may have missed a point or two. Or gotten a detail wrong. but no one reads these anyway.

mike simonsen

I dig the chart and the underlying theme. But if you look at actual home prices instead of homebuilder stocks, that boom market lasted over 10 years from Feb 96 thru Jun 06.

The point is that the oil bubble could last for many more years before popping.


Well put BIG.

It didnt take long for the comments saying "this time it's different" to show up. At least they are willing to explain it slow for the rest of us.

a reader

A chart on retail gas price would be very informative. Here in the US the price is market based. The same can not be said about other large consumers, e.g China & India.

That would shed some light on why demand hasn't responded to the run up in crude.

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