Ask the man who owns one
When it comes to analyzing speculative hedge fund investments, perhaps it’s not a bad idea to ask the man who owns one. According to the FT, investment fund owner George Soros is to tell Congress that the oil market is experiencing a “bubble in the making.” (Of course given his past track record, there’s always the question of which side of the trade he’s really on):
“I find commodity index buying eerily reminiscent of a similar craze for portfolio insurance which led to the stock market crash of 1987…In both cases, the institutions are piling in on one side of the market and they have sufficient weight to unbalance it. If the trend were reversed and the institutions as a group headed for the exit as they did in 1987 there would be a crash.”…
Mr Soros said index-buying was based on a misconception and commodity indices are not a legitimate asset class. “When the idea was first promoted, there was a rationale for it…But the field got crowded and that profit opportunity disappeared…Nevertheless, the asset class continues to attract additional investment just because it has turned out to be more profitable than other asset classes. It is a classic case of a misconception that is liable to be self-reinforcing in both directions.”
Author and consultant Daniel Yergen says that oil has reached its “break point,” where alternatives on both the supply and demand side will be brought to market relatively quickly (although he says that a “missing generation” of investment and people will prolong the oil supply side a bit).
Finally, we note that the phrase “ask the man who owns one” was originally an advertising slogan for Packard. Today’s update of that should probably take note of the forecast that 25% of European cars could be hybrids within a decade. Even if prices were to fall again, as they did in the 80’s and 90’s, we get the sense that people are pretty fed up with OPEC and its posturing this time around, and that trends like hybrids may have found their moment.
June 3rd, 2008 at 6:34 pm
Dinocrat may be right on hybrids in the short run, but what happens in 3 or 4 years when those battery banks need changing out and people are faced with a bill of thousands of dollars? That repair bill alone would buy a lot of gasoline.
June 4th, 2008 at 4:42 am
Been talking to my brother. He says the Europeans have diesel cars that currently get better mileage than hybrids, and drive better.
Hybrid is not the only solution.
June 4th, 2008 at 12:36 pm
It’s way past time that we recognized OPEC for what it is - an overarching threat to our national security. Build nuclear plants to get the energy, use it for electric cars, or hydrogen via electrolysis, or whatever. We need to reduce our dependence on oil, and these prolonged high prices will do exactly that.