Soros: Oil boom increasingly speculative

Soaring oil prices are increasingly the result of speculation, financier George Soros said in an interview published in London May 26.

The billionaire investor said the money pouring into the oil market increasingly had the look of a bubble, but that it would not burst until both the United States and Britain were knocked into a recession.

“Speculation ... is increasingly affecting the price,” Soros was quoted as saying by The Daily Telegraph. “The price has this parabolic shape that is characteristic of bubbles.”

But the cost of oil — which briefly reached new record highs of more than US$135 a barrel in trading May 22 — was unlikely to fall dramatically until the U.S. and Britain economies began contracting, the paper quoted Soros as saying. Soros has frequently been a voice of gloom and doom as the U.S. economy slows amid a wrenching housing crisis and tightening credit. But the pessimism hasn’t stopped his fund from making money.

According to Institutional Investor’s Alpha Magazine, the Quantum Endowment Fund — which Soros no longer manages — made US$2.9 billion last year with returns of over 30 percent.

—The Associated Press