If Oil Bubble Bursts, What Will Speculators Move On To?
Oil prices have been on a small, but steady, decline. The bubble is showing signs that it’s about to burst, as reported by Time, the Associated Press, The Telegraph, Charles Schwab and many others. Whether it’s sooner or later, it’s only a matter of time that it does.
Speculators are often credited with the oil bubble. That may be arguable, but the very definition of an economic bubble indicates that it’s at least partially true.
This morning there was an interesting article on NPR about speculators. I don’t recall who the specialist was that they interviewed (and I can’t find the article on the net to reference), but he directly credited the speculators with the oil bubble. The interesting part was that he wasn’t slamming them for doing so. He believes speculators help carve our future, that THEY have the money and are willing to take higher risks. So they pump their money into high risk technology, thus accelerating progress.
So if the bubble bursts, where will the speculators go to speculate? Well, you can make money on the bursts with shortselling. But not everyone does that. People will look for new trends to pour their money into.
So where will people speculate?
Alternative energy.
Yes, this isn’t news. Alternative energy has been in the mainstream for quite some time, and especially so in the past couple years.
Peanuts. It’s all peanuts.
The speculators are going to flee from oil and dump all their money into alternative energy of all kinds. And if/when they do, it can cause what will potentially be one of the biggest technological explosions in history.
This will help push the technologies, such as nuclear power, along at a much higher pace. Alternative energy, such as personal solar power, is just now becoming affordable; and it will be accelerated even moreso if/when speculators start dumping money into the technology.
The concern is that this will make alternative energy the next bubble. Some are even saying that there are signs of it bubbling already.
I’m not an economist. And I’m certainly not a managing partner of a consulting firm. But the actual need for alternative energy is so great that I just don’t see it bubbling anytime soon. And I’m not just talking the U.S., this need is for the entire world. But whether or not alternative energy bubbles or not is not the point of this article. The point is that it will be even bigger than we imagined.
If you’re not already investing in alternative energy related domains, you should strongly reconsider your strategy.
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“Peanuts. It’s all peanuts.” I’m betting T.Boone Pickens holds a few.
http://www.pickensplan.com/
***EDIT***
I don’t recall where I read it, as it was ages ago. But I read that the reason the U.S. buys foreign oil is so that we don’t deplete our own.
For instance, the middle east has a milkshake. They let us drink their milkshake. We drink it up. Soon there is no more milkshake in the middle east. The good news is that we have our own milkshake that is still full. We can then start drinking our own milkshake and perhaps even sharing it with others at a gigantic price since they no longer have a milkshake.
That’s why we buy foreign oil. Since there is a finite amount of oil available, we use up theirs while preserving ours.
I guess it’s a plan that’s a tad long-term.
-Scott