Krugman says that since we’re not building up inventories, the high price of oil isn’t a bubble:

The only way speculation can have a persistent effect on oil prices, then, is if it leads to physical hoarding — an increase in private inventories of black gunk. This actually happened in the late 1970s, when the effects of disrupted Iranian supply were amplified by widespread panic stockpiling.

But it hasn’t happened this time: all through the period of the alleged bubble, inventories have remained at more or less normal levels.

Last week I met a very sharp retiree from the oil industry who told me that oil inventory numbers have become meaningless because non-traditional firms that don’t count in standard statistics are building storage tanks at maximum speed. He seemed to know his stuff, and I certainly consider an experienced petroleum insider more reliable on this point that a jack-of-all-industries guy like Krugman. Does anyone who knows a lot about this want to weigh in?

HT: Tyler