Sunday, April 27, 2008

Which way would the bubbles burst?

Oil and Coal prices are scaling phenomenal highs. Not fully borne out by supply concerns.

Which way would the bubbles burst and what could be the impact?

One thought:-

If the prices remain high, the growth bubble will burst.For Oil, the OPEC has the ability to maintain prices at these and still higher levels.

Are there reasons to keep oil prices at a higher than normal reasons?

If the Oil and coal prices crash, and a crash can happen only if speculative positions unwind, it would be good for the global economy in the long run. But over the period of 12-18 months, the cascading impact will take down quite a few financial and non financial entities.

Detailed analysis to follow