Oil Dot-Com Bubble Burst

Interesting Take on the oil bubble if you are interested in such things as I am:

Edward L. Morse, Lehman Brothers' (LEH) chief energy economist, says the oil bubble (he dubs it Oil Dot-com) will burst by New Year's. Not only that, he predicts a plunge to about $93 a barrel (about $2.50 at the pump). Pretty audacious as prognostications go, at a time when Goldman Sachs (GS) foresees $200 a barrel. To that Morse just replies that he's the one talking sense. "We are trying to keep our heads in a wild market," he says.

Morse is the most prominent oil contrarian on Wall Street. Before joining Lehman two years ago, he taught international monetary policy at Princeton University, was Deputy Assistant Secretary of State for international energy policy in the Carter Administration, co-founded consultants PFC Energy, and was publisher of Petroleum Intelligence Weekly. "He likes to be a provocateur," says Frank Verrastro, director of energy at the Center for Strategic & International Studies in Washington, who served with Morse under Carter. Morse has made bold predictions that Russian oil would weaken Saudi Arabia's predominance (bad call) and that scarce production capacity would drive prices up (bingo).

The 66-year-old Morse gives several reasons for being bearish. First, oil has long been cyclical. Why should the pendulum stop now? Second, Morse thinks China's go-for-broke industrial economy is slowing, leading to a "radical" reduction in its oil demand after the summer. Third, he foresees a big buildup in oil inventories this fall and, longer term, a greater flow of crude as new deepwater drilling rigs reach equipment-starved producers in the Gulf of Mexico. Finally, 13 million barrels a day of new refinery capacity will be available by 2013, making hard-to-process crudes more marketable.

Don't sell that SUV just yet..................