Oil prices from around $90 to $110 a barrel far outstripped the devaluation of the US dollar

IPS Humberto Márquez writes: While oil prices recently soared to a record $111 dollars a barrel, fuelled by the weak U.S. dollar, analysts warn that the bubble will not last forever, and may burst in the medium term. “We are seeing an oil-stock market bubble,” Elie Habalián, an expert in petroleum economics, told IPS.

“In the last two months, prices have gone from around $90 to $110 a barrel -- a rise that far outstripped the devaluation of the dollar, which in the same period went from 1.46 to 1.56 against the euro.”

The bubble “at some point will burst, ushering in a drastic fall in prices in the medium or long term, and if OPEC feeds the bubble, it is creating a knife that could cut its own throat,” said Habalián, a former representative of Venezuela at OPEC (Organization of Petroleum Exporting Countries).

Why?

“If you are in a government (in an oil-producing country) and you are cashing billions of dollars every day, you may not be able to see beyond your nose. You are very happy with the money you receive each day and don’t realize the price you will pay for this will be later on,” Saudi Sheikh Ahmed Zaki Yamani, head of the London-based Centre for Global Energy Studies (CGES), said in a recent conference in Madrid.

Yamani, who served as Saudi Arabia’s oil minister for decades, gave first-hand testimony of how, in the early 1970s, former U.S. national security adviser and secretary of state Henry Kissinger helped orchestrate the rise in oil prices, which led to a loss of influence over the market by OPEC.