The Coming Energy Bubble

In the present period, it seems that many bubbles have been pricked, and are contracting. It brings to mind some beautiful high-speed filming we've seen recently on YouTube: a person holds a balloon filled with water, and then pricks it with a pin. The rubber almost instantly contracts, leaving the person holding a shimmering sphere of water for the briefest of moments. Then, inexorably, the water descends, leaving the person very wet...

The bubbles in various markets have indeed burst, but the 'water' has still not yet lost its bubble-like shape. However, we are uncomfortable saying that the era of bubbles is completely over. Indeed, we have the suspicion there are a few more, even bigger bubbles out there, awaiting the funds of the tragically credulous.

In our opinion, one big bubble of the future will be energy. There is less and less of it in the world every day... although this is nothing new. We feel that, sometime in the near future, the average person will become aware of this increasing scarcity -- Peak Oil, Peak Natural Gas, and Peak Coal. This will mark a vast change in the perception of the common person toward energy: no longer will energy be a vague thing that 'might' become scarce in a century or so; rather, it will be perceived as a very real thing indeed.

Inexorably, the credulous will invest in their perceptions, and so will the market value of energy and the companies which produce it go up. Perhaps it will be a proportioned rise in value, as compared to scarcity... but we doubt it. No, we expect a bubble to rival, and exceed, that of the California real estate bubble, the U.S. dollar bubble, and whatever other bubbles one would care to mention.

The reason people will likely throw so much money into energy is simple: human civilisation subsists on energy. It's a good 'story,' and the credulous like to invest in a good story; one only needs to look at the internet bubble -- remember that one? -- of a decade ago. Don't get us wrong: we strongly believe that energy requires some serious investment. However, we expect that the sheer volume of return-chasing one will see will be far out of proportion to the need.