Best Evidence Yet of an Oil Bubble

Paul Krugman's editorial on oil speculators is actually technically correct, but when he says that the price of oil is supported by fundamentals, well that is to me prima facie evidence of a bubble. Krugman's track record since he started writing for the NYT is terrible and betting against him would have been very profitable.

He does have one good line though:

Many economists scoffed: Mr. Masters was making the bizarre claim that betting on a higher price of oil — for that is what it means to buy a futures contract — is equivalent to actually burning the stuff.

He's right about that one. Futures contracts are nothing but bets about the future price of the underlying commodity. As Hanke points out in the post below, there are other reasons why the price is rising; the placing of bets has no effect on supply and demand.