Oil price bubble?

[accentnepal]

One of the largest factors in the global economic decline is the price of oil, which has doubled in the last year.

I believe that oil prices are behaving like a speculative bubble. Here is a column by a writer who agrees:
http://news.yahoo.com/s/ap/20080531/ap_o...xDYcib.HQA

"The rise in price of oil has weakened demand for the physical commodity, but it has boosted demand for the financial commodity since more investors are chasing returns," said Jeffrey Kleintop, chief market strategist at LPL Financial.

In the last five years, investment in index funds tied to commodities has grown from $13 billion to $260 billion, and the price of the 25 commodities that compose those indices have jumped 183 percent

..... data showing annual Chinese demand for petroleum, based on government figures, has increased over the last five years by 920 million barrels; over the same time frame, the increase in demand for petroleum futures almost equals that at 848 million barrels.

When buyers flock to a market that they know little about, and prices are increasing far more quickly than demand would justify then it is a clear sign that the top is near.  Usually a rapid run-up like we are seeing is capped by a few days of extremely rapid price growth, and then a sudden, one day, price drop on the order of 10 - 25%. A swift decline follows, with brief periods of recovery, followed with further declines. Of course the retail gasoline prices will lag behind the oil market, but eventually gas prices should substantially decline. Predicting timelines is difficult, but the November election could be a factor.