There is , what i believe, a bubble -mentality with respect to oil and other commodities -i.e. long term trends of increasing demand and diminishing supply are used to justify any increase in prices as sustainable, no matter how high. I realize that near-vertical supply and demand curves as well as other non bubble dynamics can explain sharp price increases, but the pervasiveness of this 'do not question it' mentality seems to make a bubble likely in any market where the mechanics of exchange and inventory make it feasible.
Has anyone seen attempts at predicting consequences if commodities are in a huge bubble? i.e., if peaking speculative interest and a demand shock cause oil prices to drop in half over a period of months, the impacts on agriculture commodity prices, US trade deficit, currencies, etc seem likely to be quite dramatic.
Has anyone seen attempts at predicting consequences if commodities are in a huge bubble? i.e., if peaking speculative interest and a demand shock cause oil prices to drop in half over a period of months, the impacts on agriculture commodity prices, US trade deficit, currencies, etc seem likely to be quite dramatic.
