Two months back I wrote about the Oil Speculation Bubble and speculated on what could cause it to burst. I must admit I was pessimistic in my timing despite my own gut feelings that we were going to see it burst sooner rather than later. I had nothing to base that feeling on, and felt it best not to comment on it.
Simply put, and to quote the better of two Bushes, "it's the economy, stupid." We have come to a point where it is impossible for the economies of the industrialized countries to keep up. Emerging economies in smaller nations have rammed a brick wall and are frankly not able to cope. The result has been increases in food prices, electricity prices, and finally in consumer goods.
The food price increase alone reduces the amount of money available to purchase consumer goods. You can't skimp on food. Those nations that suffer from chronic malnutrition and starvation do not have a decent consumer base to subsist off of in any event, but when that bubble of subsistence citizens increases because of food price increases, there is less money available to buy consumer goods. Demand goes down... but prices hit a bottom line where there is no profit for selling.
Much of this can be laid at the doors of oil prices. The world economy is teetering on the edge, and if oil didn't go down, the economy would crash, multiple nations would go into recession or worse, and no one would be in a position to purchase oil anyway.
The people who started pushing on selling oil have just bailed. They've made their massive profits and are moving on to the next bubble. We had a four-day decline in oil prices, a drop of 11%. What's more, one broker admitted that there will probably be more selling next week. The next wave of investors will flee this ship and we'll see prices plummet yet again, and at a far steeper rate than before; I would not at all be surprised to see oil slump to $75 a barrel, and for OPEC to state they are cutting production.
If any of you have invested in oil, I'd sell now. If you were thinking of investing in oil... don't.
Of course, there is one last question: if this speculation of mine is correct and we're about to see a massive reduction in oil prices in the next few months, what does this mean for the alternative energy programs? My suspicion is that it depends on which party wins the White House. If Senator McCain gets in, then we'll continue with oil, and push toward Nuclear energy as well. If Senator Obama gets into office... we will probably see a somewhat smaller renewable energy program than we'd see with oil at $100+ a barrel... but we'll still see pushes into solar energy and other alternatives.