Are you ready for the Great Oil Bubble Implosion?

Bubbles are funny.

Until they aren't.

Let's look again at oil, where total world demand rose by... wait for it... a whopping 0.9% (YES, THAT'S ZERO POINT NINE PERCENT) over the past year, while world liquids and crude production increased slightly more than 1%. And yet prices per bbl. rose over 80% in the past year, and 697% since 2001. Pets.oil anyone?

So what's driving the current Great Oil Bubble (GOB) madness? Oh, maybe the $3.5 trillion in oil derivatives, or the $90 billion in speculative hot money that's poured into the new commodity indexes.

There is no consumer-market-based justification for the rise in oil prices. The madness is purely and simply a speculative one, just like housing, just like dot-com stocks, just like tulip bulbs and tea.

Yes, the same hedge funds, pension funds, investment banks and hot-money investors who gave you the housing bubble and mortgage madness are now giving you the GOB.

Bubble after bubble after bubble... Just as we expected. But with housing it was "HEY, COOL, WE'RE ALL GETTIN' RICH RICH RICH!!!!", while with the Great Oil Bubble it's "HEY, CRAP, WE'RE ALL GETTIN' POOR, POOR, POOR!!!".

Keep in mind that bubbles last longer than you think they ever will. But in the end, they end. All of 'em. And this one will too. Where and when will it end? Who knows. But when it does, it will end spectacularly and gloriously. And when it does, there will be RAGE in the streets as gas prices don't come down along with the price of oil. But that's another story...

There is one nice lasting effect with this Great Oil Bubble though - it has changed the world's collective consciousness in regards to fossil fuels and consumption. The "GOB" will launch a clean energy revolution - wind, solar, biomass, nuclear and even some energies as-yet-undiscovered. And SUVs and trucks are the new mink coats - their owners are now social pariahs, scorned and mocked while they piss what's left of their money away at the pumps.

And a word for the Peak Oilers out there - yes, at current consumption and production rates, we've got a problem. But what you don't take into account is that the world (i.e. 'the market') because of prices, political instability, global warming and the dramatic change in collective consciousness, will now be making The Great Change, away from fossil fuels as fast as it can. Past demand does not equate to future demand as your projections dictate. And a Big Change is coming.

Here's some recent quotes on the GOB. Get some popcorn. And have at it.

" There's nothing different between this mania, the dot-com mania, the real estate mania, the Dow Jones mania of the 1920s, the South Sea bubble and the Dutch tulip-bulb mania. History repeats itself over and over and over again."
- Stephen Schork, oil analyst, June 2008

"Current price levels do not reflect supply and demand realities. A review of prospects for the remainder of the year also shows little support for prices to remain at current levels."
- OPEC statement, June 2008

"The supply-demand fundamentals do not explain the sharpness of the ascent this year. Nor does it make any allowance for the reaction of the end consumer."
- Bill Jamieson, Economics Editor, Sunday Telegraph, June 2008

Isn't it amazing that Harvard-educated smart guys like Ben Bernanke didn't see the Housing Ponzi Scheme and Fraud Fiesta for what it truly was?

Here's Bernanke's testimony in October of 2005 - at the very height of the speculative and criminal madness of the Late Great Housing Bubble:

"House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals, including robust growth in jobs and incomes, low mortgage rates, steady rates of household formation, and factors that limit the expansion of housing supply in some areas.

House prices are unlikely to continue rising at current rates. However, as reflected in many private-sector forecasts such as the Blue Chip forecast mentioned earlier, a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year."

And yet here's what Bernanke should have known, and simply said:

"The US and world housing markets are caught up in a speculative and fraud-filled madness, one that will come crashing down in a historic way, with many markets falling 30%, 40%, 50% and more. Housing's historic fundamentals led by the price-to-income and price-to-rent ratios have become significantly and obviously distorted by massive criminal mortgage fraud and rampant speculation. This will all end soon, and in tears."

Maybe they should put "Manias, Panics and Crashes" on the required reading list at Harvard and MIT. Pumping out ivory tower real-world-ignorant graduates like Bernanke (and Greenspan) is just such a shame.

Excellent in-depth BBC report on the UK housing ponzi scheme and crash

In America we say "get some popcorn"

In the UK, grab some bangers and mash and settle in. You ain't seen anything like this one mate...

John McCain draws a crystal clear line in the sand - NO GOVERNMENT BAILOUTS FOR FAILED BANKS & MORTGAGE GAMBLERS. Well, maybe not that clear of a line

"It is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers"

- John McCain, before he eventually modifies his position after seeing the media coverage, polling data and drop in contributions, and after he already said bailing out Bear Stearns with $29 billion in government money and selling it to one of his top contributors was not a bailout, March 2008

JOHN MCCAIN (R-AZ)
Top Contributors

1 Blank Rome LLP
$191,500

2 Merrill Lynch
$185,875

3 Citigroup Inc
$172,000

4 Greenberg Traurig LLP
$149,887

5 Goldman Sachs
$131,900

6 IDT Corp
$87,850

7 Credit Suisse Group
$87,100

8 JPMorgan Chase & Co
$76,200

9 Bank of New York Mellon
$76,050

10 Pinnacle West Capital
$75,550

11 Lehman Brothers
$73,250

And then the housing gambler Brits tried to get out of their Bulgarian investment properties as fast as they got in

RUSH FOR THE EXITS!!!

I hope to get to Bulgaria this summer to see the madness up close, and rent one of these "investment properties".

It was a Ponzi Scheme folks, pure and simple. The Brits drove the whole thing, it went worldwide, and now it's all falling apart.

Prices skyrocket when everyone wants in (sight unseen) at the same time. Well, what happens when everyone wants out? Should be fun!

The Financial Times ran a good piece on the Brits getting out of Dodge, here's all you need to know:

Bulgaria loses its allure for UK buyers

British home buyers have disappeared from Bansko, a leading Bulgarian ski resort and until recently a “hot-spot” for people seeking moderately priced holiday properties.

Mihail Chobanov, chief executive of Bulgarian Properties, one of the country’s biggest estate agencies, believes that about 50 per cent of UK investors who took a punt on the Bulgarian market four years ago are now trying to sell their properties. “Speculative buyers want to cash out and move on,” he said.

Rapid development at Bansko and Sunny Beach resulted in an over-supply of lower-priced apartments, putting a severe strain on local infrastructure. An estimated 85 per cent of UK investors bought properties off-plan without having visited Bulgaria.