One of the great pleasures in life for economists is watching bubbles burst. First the speculative air is pumped in just beyond the point of reason. There is always a trader willing to say a tulip bulb will soon be worth a million guilders; an investment bank ready to predict $200 oil prices by the end of the year. There is always a looming war or a potential harvest failure to add spurious justification. But the end is inevitably the same. The bubble bursts.

That is what is happening now in the energy market. Sometimes the bubble deflates rapidly as with the US natural gas price – now at a 10-year low of less than $2 per mmbtu. In other cases the air escapes slowly. That is what has been happening to the oil price since the announcement of a modest fall in Chinese imports.

Once the fall begins it tends to continue. European gas prices are also declining and utilities tied into long-term contracts are struggling to renegotiate terms. If the Japanese succeed in restoring some nuclear power capacity the Asia gas market will follow the downward trend. Simultaneously the important report from the UK’s energy department has reopened the door to shale gas development in Britain and perhaps across Europe.