The record price of oil is a bubble being driven by market speculators that will only burst when the UK and US fall into recession, a billionaire investor reportedly said today.
George Soros, a legendary hedge fund investor, blamed the spike in oil prices - which peaked at $135 (€85) a barrel for the first time last week – on investors betting that the cost of oil will continue to rise, according to an interview in The Daily Telegraph.
He said that the bubble will correct, but warned that this will not happen until the US and UK fall into a recession.
The British Chambers of Commerce last week cautioned that rocketing oil prices were pushing companies to the “absolute edge” amid speculation that the relentless increases could soon see oil hit 200 dollars a barrel.
Oil is now more than a third more expensive than at the start of the year and crude prices have doubled over the past months.
Rising global demand from emerging Asian giants India and China has, together with the slump in the US dollar, until now been thought largely responsible for the dramatic increases in the cost of crude.
However, Mr Soros said that speculation has been a significant factor.
He told the Telegraph: “Speculation... is increasingly affecting the price. The price has this parabolic shape which is characteristic of bubbles.”
He added: “You can also anticipate that (the bubble) will eventually correct, but that is unlikely to happen before the recession actually reduces the demand.”