Oil bubble to burst: Forbes 30-08-2005 From: Agence France-Presse
RECORD oil prices this week were evidence of a speculative market bubble that was set to burst in the next 12 months and make the hi-tech crash of 2000 "look like a picnic", US business publisher Steve Forbes said today.
The price of light sweet crude topped $US70 a barrel yesterday as Hurricane Katrina headed for the US Gulf Coast, which accounts for about a quarter of US oil output.
Mr Forbes, editor-in-chief of the influential Forbes business magazine, said inflation and increased demand from China and India only accounted for a small part of the price raise from $US25 to $US30 a barrel three years ago.
"The rest of it is sheer bubble speculation," Mr Forbes said in Sydney at the launch of a business conference.
"I'll be blunt, there's hardly a hedge fund in North America that hasn't speculated on oil futures.
"So I'll make a bold prediction ... in 12 months, you're going to see oil down to 35-40 US dollars a barrel.
"It's a huge bubble, I don't know what's going to pop it but eventually it will pop – you cannot go against supply and demand, you cannot go against the fundamentals forever."
Mr Forbes said the higher the oil price rose, the harder it would eventually crash.
"I don't think it's going to go to $US100 but if it does, the crash is going to be even more spectacular," he said.
"It will make the hi-tech bubble look like a picnic – this thing is not going to last."
Mr Forbes urged the US Government to stop adding to its Strategic Petroleum Reserve (SPR), a 700-million-barrel reserve that is meant to be used in emergencies.
"The speculators know now that no matter what happens to the price of oil, Uncle Sam is there buying almost every day," he said.
"Stop the buying and in fact throw some of that oil on the open market, boy that would throw it in turmoil and send the price down."
The US Government has said it could release some of the SPR to overcome any shortages caused by Katrina.
