Get Used to It — Sky-High Oil Prices Are Here to Stay

This ain’t a bubble, folks. Better get used to it.

We’ve gotten a little relief in recent days, but the stubborn upward spiral of oil prices isn’t going to let up to any significant degree. Yes, there’s some debate between economists and industry analysts who fall into two camps — Bubble, Not-a-Bubble — but the evidence suggests high prices are here to stay.


New York Times columnist Paul Krugman is firmly in the not-a-bubble camp. The only way for speculators to have a persistent effect on oil prices, he maintains, is if there is hoarding — a tightening of supplies. There’s no evidence of that. Oil inventories have remained at more or less normal levels throughout the recent run-up in prices.

Kevin Drum, from CBS News, agrees. He points out that the Energy Information Agency has been consistently wrong in its near-term forecasts for months now. The agency seems to insist that we’re living in an oil-price bubble, but reality refuses to comply.

On the other hand, the United States is unquestionably in the midst of an economic slowdown. As demand for imported (read: Chinese and Indian) goods slows, it will weaken economies around the world. This will weaken the price of oil, which is used to ship all those goods from country to country to store shelves. So the stubborn price of oil must be a bubble caused by speculators.

Who are you going to believe?

Wired