It's clear that off these $260 Bln invested currently in oil futures, some billions will have to be cashed in and placed into something else. It starts looking like a card castle.
The article says that it came from $15 Bln in 2003 to $260 Bln today
partly because of higher oil prices, partly because of larger investments. So at equal initial investments, if counting only the rise in oil prices, it should make $70 Bln.
The part of
higher prices is $55 Bln, the part of
higer investments (understand "speculation") is $190 Bln.
If this is not a bubble...
The oil frenzy is based on concurent factors. And we can say that we are served with the total explosive cocktail here, but I don't believe that it will last forever.
-A weak dollar
Unfortunately the dollar will remain weak. But if oil prices starts to go down for one of thet reasons below being infirmed, commodities (oil) won't be that good
a hedge against a falling dollar anymore.
-Rising demand
Another article today pointed to lower industrial output in China. Already! Yet, on another article published the same day, it's stated that gas demand is still booming in China and in the rest of Asia.
That doesn't hold water: If there is an economical slowdown, and a lower industrial output certainly is, there will be lower demand for gas from individual car owners.
That will come like a shock because everybody but me expects gas consumption to keep growing in 2008. The problem is that we don't have numbers as up to date for Asia than for the US.
The so famous BRIC regions, responsible for almost all of the global oil demand increase, have seen their economy
booming under a policy of
low gas prices for all. This policy is now under question for obvious reason.
Near $150 a barrel, it's certain that such policy is unsustainable. (see above for more details)
-oil production
Oil production has been unchanged globaly, even reduced in the US, Venezuela and Nigeria. Normal that oil prices keep climbing Mount Everest.
But what happens when oil offer finaly rises? It may take a bit longer to drill and a bit more money to pump oil deeper, but it doesn't cost $150 to do it. (see above for more details)
-Iran
That's the most dangerous factor. But it's not like no oil will pass the Straight of Ormuz if Israel (or the US) attacks.
There could be disruption, and clearly then $150 or even $250 could be justified if that happens, but it will be short term.
Iran is in no position to block the sea routes, they won't dare attack arab states and they won't disrupt their own exports.
"If israel attacks Iran" can also be "if Israel doesn't attack Iran". IMO, the latter is more plausible. Israel will attack only under extreme necessity.