What does the rising oil price have to do with the credit crunch. The two are inextricably linked, says financier George Soros.

Soros says: "We are currently experiencing the bursting of a credit bubble that has involved the entire financial system and, at the same time, a rise and eventual fall in the price of oil and other commodities that have had some of the characteristics of a bubble. I believe the two phenomena are connected in what I call a super-bubble that has evolved over the last quarter of a century. The fundamental trend in the super-bubble has been the ever-increasing use of leverage-borrowing money to finance consumption and investment-and the misconception about that trend was what I call market fundamentalism, the belief that markets assure the best allocation of resources. So much for bubbles in general. With respect to the oil market in particular, I believe there are four major factors at play which mutually reinforce one another. Two of them are fundamental and the other two are "reflexive" in the sense that they describe tendencies in the market that themselves affect the supposedly fundamental conditions of supply and demand."

He says the clamping down on speculation is not the answer because it ignores the bad stuff. He also says that curbing speculation is not the answer.

"It could serve a useful purpose at a time when the parabolic rise in oil prices reinforces the prospects of a recession but it would not address the fundamental problems of peak oil, global warming, and dependence on politically unstable or hostile countries for our energy supplies. Those problems can be solved only by developing carbon-free sources of energy. The imminent onset of a recession, by reducing the demand for oil in the developed countries, is likely to bring some relief from higher oil prices, but that relief will be temporary. It should not divert our attention from the pressing need for developing alternative energy sources, and that will entail higher prices, at least in the early stages.

"In the absence of alternative sources, the price of oil is liable to rise indefinitely. Only if we are willing to live with higher prices in order to develop alternative fuels can we hope to see an eventual reversal in the long-term uptrend in oil prices. In contrast to oil and other fossil fuels whose costs of production are bound to rise, the alternative fuels will become cheaper as we discover cheaper and more efficient technologies to exploit them, and will eventually bring down the price of fossil fuels as well."