I remain agnostic on the 'oil bubble' question, but there are some real supply constraints, and demand has run well ahead of projections (not least from China, although I don't want to over-egg the 'China is behind everything' point). Part of the reason for supply shortage has been that the oil majors have used a very conservative oil price in their financial models to assess investments, so investment has been curtailed. There has been a bit of a cartel in oil price prediction, too. Most of the major banks were forecasting prices in the mid-$20s not long ago - all using very similar models. For summary, see: http://www.rbs.co.uk/Group_Information/RBS_and_the_Economy/Surveys/downloads/oilprice.pdf Problem is, there's not enough of a cartel, so no one can make long term plans based on supplying aggregate future demand. Instead, everyone uses the same financial models, which work just fine for as long as the future behaves like the past... James Greenstein --- Doug Henwood wrote: From: Doug Henwood Date: Mon, 25 Oct 2004 13:51:27 -0400 To: lbo-talk@lbo-talk.org Subject: Re: [lbo-talk] up, up and away metaldark@insightbb.com wrote: >Could there be a price bubble effect sending the price higher than >estimates of >supply/demand predict? The long run trend is obvious but I read on here that >this quick climb to above $55 was not predicted. It's looking like it's in the bubble phase, which isn't to say it couldn't go to $75. Doug ___________________________________ http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk