Economic Bubbles, unlike real bubbles, take twice as long to deflate as to inflate. The reason is simple, every so often the drops stops for a while, investors think that is the bottom and re-invest holding the price up for a while, then it drops like a rock again.
People forget the Great Depression started in the Rural areas of the US in 1927, the Stock Market peaked on September 3, 1929, then went into a short decline.
The first steep decline was on September 18, 1929.
Black Thursday was over a month later in October 24, 1929
11% drop on Thursday October 24. On Friday October 25, the Stock Market started to buy stocks to reverse the trend, this had worked in 1907, but failed in 1929
13% drop on Monday October 28,
12% drop on Tuesday October 29,
The stock then started a slow recovery, almost reaching the level it was in June 1929 (in fact exceeding the level the Stock Market had been in December 1928), by March 1930. THe problem was from March 1930 the market went into a slow steady decline, not stopping till March 1933.
http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
http://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average
Notice the actual bubble started about 1927, as Rural America (Which was just under 50% of America at that time) went into a recession. The peak did not occur till September 1929, then staggered along for a couple of months, then collapses, recovered staggered along for another four months then went into a three year burst mode.
If you go by September 1929 it was a three and half year burst, if you go from March 1930 when the burst stopped staggering and just fell, three years.
Now, you must also understand the difference between a true buyer and a speculator. A true buyer is looking to buy something either to resell or make money on the product itself. A speculator is looking to make money on betting the price will go up or down.
In normal markets, true buyers set the price if the price is to high, they just do not buy unless they have to, but if the price gets to high they just drop out of the market. Speculators are betting the price of something will go up or down between the time they buy it, and when it is time for true buyers to buy it. Most of the time Speculators are not a problem, they may speed up a price increase or decrease but that is about all.
The problems with speculators is bubbles. Bubbles attract speculators like bees to honey. Speculators bet against each other in a bubble as the price goes up and up. The problem is sooner or later true buyers sees the price go so high, that they is no way they can make money on what is being speculated on and the True buyers withdraw from the market.
At that point the price starts to stagnate, for true buyers are no longer in the market to buy the good itself, the only thing holding the price up is most speculators do not want to take a loss, and hold onto their investments. The price then stagnate for no one is willing to sell at a loss, and everyone is holding onto the stock waiting for the price to go up one more time.
Sooner or later some speculator, fearing the price has peak will sell off his stocks, even as a lost, to minimize his loss. This will force down the price, sooner or later the price drop will cause other speculators to want to sell to minimize they lost, and the price will drop like a rock.
The issue is what is the expected return on investments of these wells as far as long term investors are concerned. In 2008 the true buyers were the people who actually buy most homes and most oil. They will pay what they think the price should be, they will pay if there remain the possibility of profit if and when the item is resold, but will NOT buy when there is no chance of profit. These buyers were the first to pull out of oil in 2008, and housing the same year. The Speculators had driven the price up to high. The problem was the long term investors is what actually sets the price of anything, and once speculators have push the price to high, the long term investors pull out leaving the speculators and speculators do not set price, they buy STOCK to resell, not the underlying items
Thus the issue is when will (or have) the true buyers left the market? In this case investors in these wells. Why would someone invest in exporting Natural Gas? The Answer is speculation, they can raise money to build an export terminal due to the speculation as to Natural Gas production. I would like to say the big oil companies and the banks would be the one's to watch, but like many people greed often over comes common sense even among the rich (and in fact more often by the rich for they have the money to invest and lose).
In 2008 the price of oil went up, till the price went so far that people actually started to drive less. Public transit went up starting around 2002, due to the high price of oil. New cars sells collapsed in 2008, for no one had the spare money to buy a new car given the price of gasoline (and those that could buy, bought small cars, not the large trucks, SUVs and large cars that people had purchased till 2008). Small cars sales have increased since 2008, but that is a long term effect of high prices of 2008, NOT a result of the collapse of the oil bubble.
One thing I would observe is over 10% of American land is now leased for oil production. NOT 10% of land with oil in it, 10% of ALL LAND. That is the highest level of investment of US land into any single item EVER (beating out corn, wheat, rice, forest and Cattle use). That is a lot of land and it is a sign that to many people are investing in this bubble.
That people are calling it a bubble is another sign, most bubbles are NOT called till after they have peaked and about ready to be popped (In the good old days, pre-Reagan, post Great Depression, the Federal Reserve would pop such a bubble for they kept an eye on them, mostly by watching the stock market and when it became to unsteady, the Fed would pop any bubbles supporting the unsteadiness on the stock market).
The fact that the Fed no longer pops bubbles is why the last several bubbles have cause so much economic damage. Given the Fed's refusal to pop this one, shows the Fed still will not pop a bubble. The longest serving head of the Fed, William McChesney Martin, Jr, who headed the Fed from 1951 to 1970 made the following comment:
{the job of the Fed was} "to take away the punch bowl just as the party gets going,"
http://www.nytimes.com/2007/12/23/business/23view.html?ex=1356066000&en=3337604c8708710a&ei=5090&partner=rssuserland&emc=rss&_r=0
http://en.wikipedia.org/wiki/William_McChesney_Martin
The Fed, in many ways, have failed to do so since Reagan and that is the problem today.
Now, to your question, what to look for? Look at who are the natural investors in such investments. Someone who will invest because he can sell the product NOT just the stock. Often this depends on the final buyer of a product, but not always. The famous tulip bubble of the 1630s. Tulips are planted in a garden to make the house or garden look good. Gardeners like them for that reason. When introduced in the 1600s they were a huge hit in the Netherlands, and the price went up and up. Speculators cornered the market and pushed up the price even higher. Gardeners finally pulled out, prices continued to climb but sooner or later it became clear that no one by a speculator would buy tulips at the prices being asked and the bubbles burst.
http://en.wikipedia.org/wiki/Tulip_mania
The same with these investments, Oil and Natural Gas are in plentiful supply at today's prices, so why would someone buy Oil or Natural Gas from one of these wells as oppose to Saudi Arabia or Iran? The answer is they will not.
Given that it takes about 1/3 of the Volume of Natural Gas in terms of energy to compress Natural Gas from a Gaseous to Liquid form, any natural gas shipped anyway other then in a gas pipe line will cost 1/3 more then if shipped via a pipeline. Thus Russian natural gas can be 1/3 more expensive to produce then US gas, but the prices would be the same in Europe or China (Both at the end of Russian Natural Gas lines). Thus would you invest in Russian Natural Gas or Natural Gas from one of these producers? If US use, then these producers, but in Europe Russia.
Iran is building a pipeline between itself, India and Russia, to ship its Natural Gas to India and Pakistan or even Europe via Russian pipelines. I have read stories some of the Persian Gulf States are looking into hooking up with Iran to ship Natural Gas via pipeline (and one of the reason for the fighting in the Middle East is Saudi Arabia want to minimize Iranian influence, influence on the raise given its location and its future ability to ship Iranian and Persian Gulf Natural Gas to Europe via pipelines instead of by ship).
If things work out for Iran, it may soon be able to ship its natural gas by pipeline to India, China and Europe via Russia.
http://english.irib.ir/news/political4/item/107455-iraqi-govt-calls-for-construction-of-iran-europe-gas-pipeline
Syria-Turkey-Austria Pipeline:
http://en.wikipedia.org/wiki/Nabucco_Pipeline
http://en.wikipedia.org/wiki/Trans-Afghanistan_Pipeline
Iran Pakistan pipeline (this is opposed by the US, but is being built. technically India has dropped out of this pipeline due to US pressure, but still sends out diplomats when meetings involve the pipeline are held. i.e. they are still interested):
http://en.wikipedia.org/wiki/Iran%E2%80%93Pakistan_gas_pipeline
Turkmenistan -Iran Gas pipeline:
http://www.globalresearch.ca/pipeline-geopolitics-major-turnaround-russia-china-iran-redraw-energy-map/16932
http://www.rawa.org/temp/runews/2010/05/22/russia-china-iran-defeat-u-s-in-the-pipeline-wars.html
Thus, the US Natural Gas producers are facing some serious competition from Russia and Iran when it comes to exports to China, India and Europe. Yes, these pipelines are expensive, but long term use less energy then is loss during liquidation of natural gas. Furthermore none of these fields are the deep fields the US is putting into production. The Russian and Iran Natural Gas Fields are like old fashioned America Natural Gas Fields, large and last for decades.
Now, as you can see US propaganda about natural gas is tied in with US desire to reduce Iranian influence in India, Central Asia and Pakistan (in addition to the Middle East). The Iranian-Syrian pipeline is more to give Iran another option to Russia if such an option was needed AND that pipeline would ship natural gas to Europe from the Persian Gulf nations cheaper then the present system to shipping by Liquefied natural gas ship.
Thus I suspect the Government will help to keep this bubble alive, when it should be killing it. That so many people are calling it a bubble remind me of the story of the Stock Market Broker in the summer of 1929, who ended up talking to his shoe shine man about the stock market. The Broker made the comment if a shoe shine person is investing in the stock market, it is a sign to many speculators are in it and he dropped out in the Summer of 1929 (and save a lot of money by missing out of the crash).
I hate to say it, I suspect the bubble is about ready to burst, but to many people want it to survive so it is holding on, but sooner or later it will fall, like oil and housing did in 2008.
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