The Light Entertainment at the End of the Tunnel. Ridin' that train... yes, that train...

Wednesday, July 16, 2008

Oil Bubble a prelude to Iran Attack?

It has been suggested that current high oil prices are the result of market manipulation rather than normal market forces. See for example F. W. Engdahl. Such manipulation could be done for political purposes. For example, it could be done to deter an attack on Iran. In this case the oil price would remain high up to such an attack and spike upwards in the event of one. Alternately, and in my opinion much more likely, given Engdahl's description of the manipulators, it could be used as a prelude to such an attack. High oil prices reduce consumption and tend to increase exploration, production and possibly oil stockpiles, all of which is desirable if closure of the Strait of Hormuz and other disruptions of Middle East oil supply is contemplated. If this speculation is correct, then it can be expected that the bubble will be collapsed in coincidence with an attack on Iran. My guess is that it would be collapsed prior to such an attack by a few weeks or a month. Such an attack would be unlikely during the US Hurricane season, and is also unlikely before the US presidential election unless a really solid "outrageous provocation" can be engineered.