China's Growing Economy Might Bust the Oil Bubble

Daniel Gros, Centre for European Policy Studies | July 10, 2008

Economists are baffled why higher oil prices and higher demand has not lead to higher production. ++ The answer is: the “China bubble.” ++ Oil producing countries are leaving oil in the ground, in hopes that China’s consumptions and readiness to pay higher prices will increase over time. ++ Low US interests rates deter further drilling, as invested US Dollars are less lucrative. ++ As it is with all speculation, the bubble could burst, for example, with the introduction of cheaper energy sources or a stagnant Chinese economy.