By Edmund Conway
Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.
The billionaire investor's comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.
In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation.
"Speculation... is increasingly affecting the price," he said. "The price has this parabolic shape which is characteristic of bubbles," he said.
The comments are significant, not only because Mr Soros is the world's most prominent hedge fund investor but also because many experts have claimed speculation is only a minor factor affecting crude prices.
Oil prices stalled on Friday after their biggest one-day jump since the first Gulf War earlier in the week.
At just over $130 a barrel, the price has doubled in around a year, causing misery for motorists and businesses.
However, Mr Soros warned that the oil bubble would not burst until both the US and Britain were in recession, after which prices could fall dramatically.
"You can also anticipate that [the bubble] will eventually correct but that is unlikely to happen before the recession actually reduces the demand.
"The rise in the price of oil and food is going to weigh and aggravate the recession."
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