Grandpa, tell me 'bout the good ole days.

As I was growing up, I loved to listen to the stories my parents would tell of growing up during the Great Depression:

Penny candy that would feed three kids; monthly apartment rentals on the West Side of Chicago under $20; mind-numbing poverty; and community born of shared dependence. I never thought I'd have the power to conjure up stories from my past that would hold the thrall of my children as I was held captive by the world gone by of my parents.

And yet recently I happened to mention to one of my sons that I remember being in the car when my dad paid 26 cents per gallon for gasoline. His countenance quickly became one of wonder and awe. Knowing a good opening when I see it, I quickly launched into a "yeah and that's not all" story. I told him all about the gas lines of the '70s and the formation of the blackmailing oligopoly we've come to know and love as OPEC. His countenance quickly changed back to "what am I doing in the car with my old man." But it did get me to thinking.

Recently Americans have been acclimating to $2.25 gasoline and the economic press is predicting $100 per barrel oil. The futures markets have recently seen $58 per barrel oil and despite recent retreats to $52 per barrel, we are being told that this is temporary and that we'd better get used to a Europe-like permanent hike in the cost of energy. Let me beg to differ.

The recent spike in oil prices is a speculative bubble that will burst in due time. The data doesn't support any other conclusion.

It is true that we haven't built an oil refinery in the US in 30 years, but other countries have. Refining capacity hasn't changed radically during the last year.

It is true that unused production capacity in Saudi Arabia (the so-called Central Bank of Oil) is at recent lows, but it is also true that new fields in Gabon, Equatorial Guinea and Iraq are all coming online and increasing production.

It is true that the Chinese economy is growing at an unprecedented rate, but it's only unprecedented for China. The absolute growth in the consumption of oil in China is not a reason for the doubling of the price of oil in the world markets. Most Chinese are still biking to work.

It is true that there is war in the Middle East. But it is also true that this war has opened the world markets to Libyan and Iraqi oil that was until now withheld from Ma & Pa Kettle (although one should note, not from Kofi and the Anon clan).

It is true that the demand for electricity worldwide is on a stiff upward slope. But it is also true that most of the growth in demand for electricity will be met by other fuels. Coal and gas will satisfy most of the growth needs of the world's power plants for the decades to come. Nuclear and alternative energy will also take up some slack here.

It is true that in 1971 proven oil reserves were only 670 billion barrels and that since then we have consumed over 750 billion barrels. But it is also true that because of human ingenuity, we currently have proven reserves in excess of 1.3 trillion barrels.

It is true that alternative energy sources such as hydrogen, synfuels and agfuels are relatively unused or unproven. That is true only because oil has been so cheap for the past several decades. Indeed, in constant 1996 dollars, oil is still cheaper than it was in 1973. But by comparison to long-term $60 per barrel oil, synfuels and ethanol are proven, deployable and cost-effective solutions that would act as a damper on world demand for oil. Hydrogen is not far behind.

In short, there is no shortage of oil, oil reserves (estimated or proven), tankers, pipelines, refineries, distribution depots or trucks.

The current "energy crisis" is an artifice; a ruse; an illusion.

It is a replay of the same Malthusian soundtrack that gains traction in the media every decade or so as otherwise thoughtful people shelve rationality and subscribe to the febrile belief that the world has suddenly and without warning run out of natural resources.

As the belief in the imminent shortage of oil gains credence among the populace and in the press, the market makers in production, supply and distribution hike prices in anticipation of the coming squeeze. This in turns provides a feedback loop to the markets that they were right all along, encouraging additional speculation which encourages further hoarding of resources thought to be scarce.

Eventually, the bubble will burst and the price of oil will descend to the historically supportable levels of $25-$35 per barrel. Gas prices will move too (although not collapse, gas prices tend to move more like the graph drawn by the nose of a Jose Canseco bobble head sitting on the dashboard of a car traversing railroad tracks).

To paraphrase Winston Churchill: The only thing we have to fear is the fear of high oil prices itself.

This is not an investment missive urging you to go out and short the oil markets. (If I knew exactly WHEN this was going to happen, you'd be reading a short Haiku on breakfast cereal right now).

But I do think that the days of $1.25 gas are not gone for good. If I'm right, that should at least be good for one or two "GRANPA! Tell us the story again about how gas used to be under $2.00 a gallon."

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