Would you like to buy shares in my perpetual gold mine?

It’s a lot like the Hot Christmas Toy Phenomenon: companies with said toy will hoard the items, creating buzz and an artificial shortage. Shoppers will be frenzied enough to pay for the Hot Toy at any price, including going on eBay to fork over hundreds of dollars. But once the kids get the toy and lose interest, those who put the hot toy on the market for $1,000 and still have it in their hands, unsold, won’t be able to get rid of it. The stores themselves will be overflowing with these Hot Christmas Toys by January, unloading them for much less than the retail price.

The same thing will happen to oil. This is the usual spring hysteria because of spring maintenance. I predict by around Memorial Day we’ll reach our peak, then go down a little until Labor Day, and then go down steeply from there. Also consider that this is an election cycle: OPEC is watching very carefully on who will be elected, and if they see a President they can do business with, they’ll flood the markets with millions of cubic meters of oil, thus crashing the prices down very quickly.

It’s scary now, but like the housing market, just be patient. The speculative bubble is coming soon.

The International Energy Agency (IEA) gives alarm: The world could run out of oil faster than expected – the danger of a supply shortage is rising
Hunger for energy vs. energy shortage: While the demand for oil is on the rise, the production is decreasing – shortages, escalating prices and inflation are looming. When talking to energy politician Astrid Schneider, Faith Biro, chief economist of the IEA demands a change in policy from the member countries. His motto: leave oil before it leaves us.
Interview follows: http://oildepletiondebate.blogspot.com/2008_04_01_archive.html

Money quote:”This is not anything new and it will not help ease oil prices,” said Ehsan ul-Haq, head of research at JBC Energy in Vienna, Austria. “The oil futures market is very strong, but the physical markets are not so strong.”

It’s a price bubble. Remember what happened a couple of years ago. At first, a few articles came out, warning we had a housing bubble. They were ignored. Now, houses in the area where I live that were easily selling for $300,000 are sitting for months at under $200,000.

What makes you think oil is any different? Oil has a history of boom and bust and anyone who ignores that cycle does so at their own peril.

The “peak oil” experts have been predicting the downfall of oil every year for the past 25. Their gurus have about as much credibility forecasting as a 5th grader.

I think the more compelling element of this would be the massive flow of money into commodities via pension funds, investment banks and ETFs in search of high returns. For instance, ETFs now control nearly 20% of the world’s gold. Every single commodity is going nuts (if you think oil is bad…go look at wheat, corn, or soybeans) and every day I see a new investment “opportunity” in commodities everywhere I go (radio, tv, newspapers, etc.).

However, The most telling element of this dynamic is demonstrated in the fact that nobody can separate the effects of inflows of money into these markets from the fundamentals.

The shakiest assumption of the oil bubble is that India and China are going to grow to the sky. India’s oil consumption been relatively flat over the past 3 years (look at the EIA data, not what the “peak oil” advocates/the whack-jobs say) and China’s stock market has crashed nearly 50% in 6 months. Do you think those things will have an impact on price?

Real estate developers used demographic projections of 20-25+ years to demonstrate infinite demand for new housing units as a way of propping up the bubble. I see nothing different here.

Saudi King Abdullah drops quiet bombshell; U.S. media sleep through it
http://www.aspo-usa.com/index.php?option=com_content&task=view&id=358&Itemid=91

The Hirsch Report

The Government Accountability Office Peak Oil Report

http://netoilexports.blogspot.com/

Dr Sadad Al-Husseini
Brown University PhD, former head of Saudi Armco’s production & exploration
November 1, 2007 interview
Page down to: Listen to the interview with Sadad al-Huseini.
http://www.davidstrahan.com/blog/?p=67
http://www.energybulletin.net/36510.html
In a revealing interview with journalist David Strahan at this year’s Oil & Money Conference, former head of Saudi Arabian exploration & production Sadad Al-Husseini told the world that he now believes that the current level of world oil production will likely never be exceeded.