oil hype

As oil is now over $130/barrel there is lots of news about oil prices in recent months but I think this is going to be another bubble that has occurred over the past decade. Here are the others:

1) In 1999 everybody was into stock investing as the stock market was giving 20% plus annual returns. The hottest thing was new internet stocks. Many of them doubled in value in less than a year. The common person started owning stocks and CNBC was a big hit. Yes the internet was the new thing and internet companies had a lot of potential but nothing could justify the huge run up in their stock price. Of course after 2000 the stock market dropped especially the Nasdaq and today, 8 years later, out of the major indexes the S&P 500 and Nasdaq are still below their 2000 highs and the Dow Jones Industrial is just barely above.

2) in 2004-2005 everybody was getting into real estate and housing prices were appreciating 10, 20, even in some places 30% a year. People were buying homes that they could not afford and home building/decorating shows became hits. Yes, interest rates were low and the economy was healthy so housing prices should have gone up a little, but the run up in house prices was out of control. Over the last year or two house prices have leveled off and in many places have dropped. It will probably a rough near future for housing market with many parts of the country prices staying flat or falling for many years to come.

3) Now the price of oil has doubled in a year and is over 5 times what it was just a few years ago. Yes there is more demand from around the world as many countries (particularly China and India) have rapidly growing economies. Yes, there are supply and demand reasons why oil should rise, but does it justify the price of a barrel to double in a year? I don't think so.

All 3 things are examples of speculators driving up the price of something to such high levels that it causes the prices to drop because they simply got to be too high. All 3 have justifications to go up in the long term but little justification to go up as much as they did in the short term.