Do you think that another oil bubble is growing (like the one in summer 2008)? Oil is slowly increasing and the OPEC doesn't want to increase its production (they say that 100$/barrel is "a fair price"). The demand increass (thanks to the cold weather) so even from a fundamental point of view the price goes up. The energy bill will again increase in US in 2011 and as usual if the BRIC development pursues its way then the consumption will increase. So everything increases except the production Do you think that there are strong speculations at the moment on oil futures ?

up to few weeks ago, 80$/bl seemed to be a fair oil price for every parties.more recently, OPEC countries declared that they wouldn't change their supply levels if price don't get up to 90/bl.the barrel was above 90$ for various sessions now. but, the OPEC countries haven't reacted, yet.and, today some analysts expect CL price at (above?) 100$/cl in 2011(http://www.liveoilprices.co.uk/oil/oil_ ... ollar.html)specs actually are long on CL according to the CFTC data .....

I would not pay to much heed to what OPEC says (I think their press releases represent the worst in arrogance of autocratic regimes i.e. our people believe our BS propaganda, therefore the oil markets will too)See:http://www-personal.umich.edu/~twod/oil ... _sep84.pdf(it is a bit outdated but the dynamics are still very relevant)and http://ideas.repec.org/a/ucp/jlawec/v40 ... 9-316.html(a more game theoretic perspective)that being said there is good reason to suspect that oil prices will rise in the near term (i.e. 2-5 years) as at the margin it is very hard for supply to rise causing demand to shoot prices up (i wouldn't be surprised at 150$ by late 2011).the QE and deficit policies of the US are naturally going to drive up oil prices in terms of US dollars indicating that a basket of currencies (or the yen perhaps) may be better at finding the real price of oil. one thing that i have been keeping my eye on is the subsidized demand for oil in developing countries. in mid 2008 the global subsidies to oil consumption were running at $520 billion. if oil prices rise again with debt adverse global markets we could see sudden shifts in demand as budget deficit's swell causing the countries to drop their subsidies ad-hoc.http://www.imf.org/external/pubs/ft/spn ... pn1005.pdf(a concise read of global oil subsidies)

QuoteI would not pay to much heed to what OPEC saysOPEC countries are endowed with about 3/4 of the world total proven oil reserves.one simply can not ignore what the OPEC countries 'say'.thank you for the readings you suggested

I think exactly like honeyoak87, I don't think OPEC cartel has a lot of impact, they talk the talk about limiting supply when they gather and once at home, they increase production to maximize their profit...

Here a little article on the topic financial times articleThe end of the article is funny. Some financial analysts are just Nostradamus ."The global recovery was built on sand and relied on cheap energy prices. Persistent $100 a barrel oil kills it. Recession in the west combined with tumbling world trade leaves emerging economies realising their 2009-10 renaissance was a mirage. The global recovery peters out in 2011 and oil demand drops so precipitously that prices soon fall back to $40 a barrel and stay there. The years 2011 and 2012 are terrible for advanced economies; growth stalls, unemployment rises and deficits grow. The eurozone crumbles, spreading misery and unemployment to all regions, including emerging economies. But by the end of 2012 low energy prices allow economies to resume growth. Unemployment begins to fall and Barack Obama, US president, squeezes to a second election victory. For many years thereafter, Opec countries decide that oil prices much below $50 a barrel are not in their own long-term interests.What seemed to be a disaster is later recognised to have been the saviour of the west."How are we supposed to believe that ?

Expensive oil is good: it creates the incentives to develop new, energy-efficient technologies and reduced the production of CO2.

Remember not all oil prices are the same. Here is an interesting view on the WTI - Brent spread. Brent priced higher because there is more demand from Europe due to the possibility of Suez closing. Interestingly this affects the forward prices too.

QuoteOriginally posted by: frenchXDo you think that another oil bubble is growing (like the one in summer 2008)? Who said the summer 2008 was a bubble?

There are lot of research papers of that whoseThe oil price really is a speculative bubbleThe 2008 oil bubble: Causes and consequences only to quote a few. I know it's quite controversial now but what was it if it's not a bubble which exploded ?

QuoteOriginally posted by: frenchXI know it's quite controversial now but what was it if it's not a bubble which exploded ?A logical projection of exponential demand growth (E.g., BRIC) and constrained supplies (declining productivity in many oil producing regions). The "bubble" price reflected the expected future value of oil under the then-projected supply/demand trends.When the recession clipped demand, oil prices quickly reverted to the current marginal cost of production rather than the future value of oil.

If you say that it mean reverted to its fundamental value then why it started again one year later ? *please note that the graph ended at january 2011 so you can't say it's due to Japan event or Middle East riots. I agree that the oil consumption is increasing in developping country but I would expect an underlying trend in the price and not a sporatic burts.What is the difference between "a logical projection which reflected the expected future value" and " a speculative non fundamental value"? In my view the BRIC demand is not enough to explain such deviations for the trend.

FrenchX: Nice charts.There are lots of reasons why the oil price just keeps on going up:1.) Unprecedented QE and low rates from the west which "won't trigger inflation" - haha what a joke. This is like the Titanic heading towards inflation which would take years to steer away from even if they start to raise rates now.2.) Turmoil in the Middle East and N Africa which has come about due to a) Rampant inflation b) No democratic rights and high corruption c) Ongoing sectarian deep deep problems d) other various corruption problems which the West helped introduce over 40 years ago for the oil e) new technologies allowing the democratisation of content creation, editing and delivery making propaganda more difficult3.) Alternatives like Nuclear are just not easy solutions - Fukushima. Green energy is clearly going to be very expensive - so thats not going to push the price down for a while. The most "obvious" big green energy projects like the Three Gorges or the Hoover dam are built.4.) An ongoing addiction to the car, especially in the US where frankly I can't see how society can survive in its current form without it - given the clear "fear and loathing" of public transport. Electric cars require lots of batteries, and heavy metals are expensive and cause dangerous pollution when mined (and therefore always will be expensive). There are no "deposits" of uncombined hydrogen on the earth. Production of hydrogen "batteries" requires a lot of energy and extra infrastructure.5.) Ageing fields in north sea, gulf of mexico etc causing rapidly inflating prices of extraction. The BP disaster, for example, cost ~40bn dollars and fundamentally was caused by the incredible engineering difficulties of controlled drilling at those great depths - it would be overly optimistic not to expect more disasters on that scale in the future given the difficulty of the engineering problems.6.) Perhaps ultimately even the real biggies, like the fields in Saudi Arabia are beginning to ageFundamentally, it is a finite resource - so in the real long run (over the rest of our lives), why should it mean revert?

In the article first article you pointed to I have to say that there are multiple things I don't agree with. Probably just to sum up some general feelings I'll quote this bit:"The reasoning is simple. Oil is an asset like, say U.S. Treasury bonds. Putting aside any risk premiums, holding the oil asset should be equivalent to holding the bonds and, therefore, must yield the same rate of return. Since oil reserves do not pay interest, there must be an annual increase in the oil price that is equal to the rate of interest."This is loaded with so many unuttered assumptions ... Oil is not like any asset, it is a commodity, and a particular type of commodity which on the supply side is about digging in the ground, digging deep under the ocean, pumping (plus pumping brine in), modelling to find it, maintaining pipes, moving it around, refining it &cetera. So, in short, "There are many more things on heaven and earth that are dreamt of in your philosophies" to the point here where with the above statement its just pointless uttering it at all. On the demand side oil is about travelling from A to B, heating your house for comfort or so you don't freeze, generating energy, running computers and generally living a civilised life.So "Oil is an asset like, say US treasury bonds." Why? What? A US bond heats my house? A US bond cooks my food? A US bond gets me from A to B? A model says "must yield the same rate of return" but this model is bunk anyway as we well know. Haha its all just intellectual sophistry. We might as well just make up a whole new languange, and parry discussions with each other based in this new language until we die gaining no new real knowledge ... oh whoops we do this already.

QuoteOriginally posted by: TitanPartners4.) An ongoing addiction to the car, especially in the US where frankly I can't see how society can survive in its current form without it - given the clear "fear and loathing" of public transport.The reason people loathe public transport is that it sucks on all of the most crucial performance dimensions of transportation: speed, flexibility, and carrying capacity. For most people and most cities, public transport only works if they are a low-wage-earning commuters. As soon as a person needs to visit multiple locations per trip, values their time at more than minimum wage, or needs to carry kids & groceries, then a personal automobile makes more sense. Moreover, personal mobility is crucial for economic growth by increasing access to jobs, goods, services, and affordable housing.