The Oil Drum

A good many years ago, I read George Soros' "The Alchemy of Finance", which introduced me to the concept of reflexivity, which in a nutshell is when observers of a phenomenon can't help but impact the phenomenon itself via their 'observing', thus changing the original underlying fundamentals and setting in motion a boom-bust dynamic (i.e. more exaggerated trends in both directions). Since Mr. Soros recently spoke to Congress regarding the oil futures market 'bubble', I thought I'd take a closer look at the concept of reflexivity, both as it relates to oil and commodities in general, as well as its broader implications for efforts in raising awareness of global resource constraints.

"Be afraid. Be very afraid." That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel. The other, billionaire investor George Soros, wouldn't make any specific predictions about prices. But as a legendary commodities player, it's worth paying heed to the words of the man who once took on the Bank of England -- and won. "I'm very worried about the supply-demand balance, which is very tight," Soros says.