Sunday, May 25, 2008

Oil prices predicted to fall

Thats what Amy Auster of the ANZ and other economist are saying. My gut feeling is they are right. The rapid rise in oil price looks like a bubble waiting to burst to me. Even if the oil price didn't come down soon market forces should ensure it eventually will. At current prices alternative sources such as shale, coal to oil etc become economic. The high prices is an enormous incentive to get them in production.

I'm old enough to remember the "energy crisis" of the 70's. The price of oil went sky high causing a world wide economic crisis. But eventually alternatives came on line and the shortage became a glut. I don't see why this should be any different. Petrol/ alcohol flex-fuel cars, which I'm an advcate of, would hasten that and would permanently end the oil monopoly.

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