Best Columns: Bursting bubble, Bubble boosting
The deflating energy bubble
“Energy prices are headed lower—really,” says Jim Ostroff in Kiplinger.com. “Look for oil prices to fall about 30% to around $100 per barrel by the end of the year,” and gas prices to “dip to $3.45 a gallon by December.” Why? “Demand is falling,” just like it did in 1979-80, when the last oil bubble deflated. People are buying smaller cars and less gas, and not just in the U.S.—“demand will slacken” in Asia, too, as gas subsidies vanish. Prices won’t collapse like they did in the 1980s. But supply is quietly increasing, the dollar is gradually recovering, and the “speculative froth” is subsiding. We won’t get a “decades-long trough” in prices, “but pricking the commodities bubble will sure feel good.”
Defending the bubble
Bubbles aren’t all bad, says Chris Farrell in BusinessWeek.com. If anything, we should “heap praise on speculators—and the market bubbles they help create.” And not only should we applaud them, we should limit “the damage from the bust” when “things head south.” Speculators are pioneers, and their bubbles are “capitalism’s way of rapidly transforming an economy.” The “dot-com boom/crash” quickly created the Internet economy. And while “bubble bashers dwell on the bad,” for every crashed Webvan there is a booming Amazon. Today, the run-up in oil is tied to the investment bubble in Asia. When it inevitably bursts, the “stronger economic ties” between developed and emerging economies will remain.
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