Mercury Rising 鳯女

Politics, life, and other things that matter

Bubbles, Bubbles Everywhere

Posted by Phoenix Woman on March 13, 2008

Except, as Jerome a Paris points out, where they really exist:

I must admit that I’m continually amazed these days about how easily the oil price increases and the development of renewable energy are labelled as “bubbles.” After years during which the blatant real estate bubble was ignored by all “serious” commentators (and after an earlier decade when the reality of the dotcom bubble was similarly denied until the crash had happened), they now find it extraordinarily to use that label freely for any inconvenient price evolution.

But, of course, it is easy to understand. It is so much more comfortable to paint the ever-higher oil prices, and the development of still thoroughly hippie-tainted wind power as temporary aberrations or meaningless bursts of irrational exuberance rather than as persistent realities, because that would mean that the comfortable assumptions that underpin today’s economic model have to be questioned. Perpetual growth, the deification of the quick buck based on blissful ignorance of externalities, and individual freedom have to give way to long term planning, intrusive regulation of pollution and emissions, policies to reduce demand and care for the commons.

And that cannot be promoted, can it? Thus, it’s a bubble.

I’ll actually go further and state that this is very likely originating from the lobbyist firms for Big Coal and Big Nuclear. With investment banks suddenly unwilling to provide easy financing for new coal plants, and with no new US nuclear plants having opened since 1996, there’s a lot at stake for these industries.

3 Responses to “Bubbles, Bubbles Everywhere”

  1. Charles II said

    Well…

    I am looking at a chart of STP, a Chinese solar power company. One year ago, the price was $36.31. Three months ago, the price was $88.35. The price at this moment, $31.87. The same general trajectory is seen for ESLR, a solar company, PBW, a clean energy fund (and so on). Some companies have not gone up so far, and FSLR hasn’t fallen as far, but there’s a remarkable similarity in chart shapes.

    What is it called when the price of something changes so quickly?

    As for oil, if there’s war with Iran, then prices will be elevated in the medium term, and I don’t think that’s called a bubble. But if war does not materialize, the realistic price for oil is about $80. I’d call that a speculative bubble, but one that’s based on far more solid reasoning than the STP case above.

  2. Sounds like the bubble for STP’s stock has already burst, then. I’d like to see how STP compares to, say, NanoSolar or other companies.

  3. Charles II said

    Nanosolar isn’t public, so it’s hard to tell.

    But if this weren’t a general pattern, it wouldn’t be evidence of a bubble. All the companies show a similar bulge in prices toward the end of last year, followed by a decline. After a five-fold ramp-up last year, FirstSolar has managed to sustain its price levels, with only a -40% peak-to-trough movement and a rebound to just -20%. That’s the best case, probably based on genuine expectations that the thin-film technology will do well in a time when polysilicon is expensive.

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