At a business conference in Sydney, Australia, Steve Forbes suggested that President Bush sell the US oil reserves and warned that the price of oil represents a speculative bubble. According to Radio Australia:
FORBES: One way to bring the price of oil down would be to stop buying for strategic petroleum reserve, which has over 700 million barrels in it already. The speculators know now that no matter what happens to the price of oil, Uncle Sam is there buying almost everyday. Stop the buying, in fact throw some of that oil on the open market or that boy, throw it in turmoil and send the price down.
Forbes went on to point to the Fed’s role in creating this environment adding the price of oil to Greenspan’s bubble portfolio.
FORBES: Part of it is supply and demand, yes India and China are buying more of the stuff, as the global economy expands more energy will be consumed. But if you look at the price of oil three years ago, it was 20-25 dollars a barrel. Supply and demand might have shot it up to 30-35 dollars a barrel. The rest of it is inflation. Our central bank, the Federal Reserve had been creating too much money. I think they’re beginning to pull back from that and then the rest of it is sheer bubble speculation. I’ll be blunt, there’s hardly a hedge fund in North America that hasn’t speculated in oil futures.
Forbes then discussed his thoughts on the possible future price of oil.
FORBES: I think in 12 months, your going to see oil down to 35-40 dollars US a barrel. That is pure speculation, it is 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 for ever and I don’t think it’s going to go to 100 dollars U-S and if it does, the crash is going to even be more spectacular. It’ll make the hi-tech bubble look like a picnic. This thing is not going to last.
