Infinity squared?
Where things stand today: oil has surged another 3% in one day, 35% for 2008, 100% in the last 12 months, and no end in sight. It’s like there was a permanent shortage of common stock in Japan in 1988, or of internet stocks in the US in March 2000, etc. WSJ:
The Dow Jones Industrial Average, which plunged 200 points on Tuesday, slid another 200.86 points in recent trading, off 1.6%, at 12627.82. Its financial and consumer components declined; its only gainers were oil giants Exxon Mobil and Chevron, which each saw only slim gains.
Crude-oil futures, which had risen by 35% this year heading into Wednesday, surged over $133 a barrel after Energy Information Administration data showed that U.S. oil reserves fell last week, contrary to expectations for modest growth in stockpiles. Crude settled up $4.19 at $133.17 in New York and is more than double its price of 52 weeks ago.
So oil continues to destroy all in its path. But people seem to focus on supply and not on demand. Examples: (a) “Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87m,” Mr Pickens said in an interview with CNBC. “It’s just that simple.” (b) “Just the slightest piece of bullish news will cause prices to surge,” said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos. But prices also rise when bearish news is reported…” Perhaps the law of supply and demand has been repealed in the singular case of petroleum.
Of course, oil indeed may go to infinity, driving relentlessly upwards as everything it powers, from the SUV’s in the richest country in the world, to the lowliest motor scooter in rural Asia, grind to a halt. Up, up and away! Didn’t that happen with wheat just a few months ago too? And what happened to that story. Let’s take a look:
So wheat went up even much further than oil, and tanked in the space of few months. Perhaps that’s in our future in oil as well. Now we see no end in sight to the disgusting profiteering in oil futures by the well-dressed and well-mannered Index Speculators. As that ring said: this too shall pass. But when?
May 22nd, 2008 at 9:31 am
Holy Cow copper, oil and wheat
May 22nd, 2008 at 12:29 pm
Just want to point out that fundamentals may have helped drive down wheat. Acreage is up and the prospects for a big crop are good. Don’t see similar good supply news on the oil. There are also substitutes for wheat. There is no substitute for oil. The law of supply and demand has not been repealed. IF global demand slows the market will correct and those hated speculators will be leading the stampede for the exit. OTOH, if Pickens is right and demand is outstripping supply, the market may still be searching for a price that will limit demand. Having said that I am still in Dinocrat’s corner in that there should be a correction. The question is when? One wonders how much of the world’s wealth can be siphoned off to pay for oil befor economies begin to implode?
May 22nd, 2008 at 8:37 pm
The substitute for oil is more oil. It’s in ANWR and off the coast of Florida and in the Alberta tar sands and in the western US shale. It’s all economically extractable at these prices. Our “leaders” have decided we won’t use this oil.
The people are getting what they have asked for, good and hard. Don’t like what’s happening? Look in the mirror. Your Congress is responsible. You enabled it. They are paying subsidies to millionaire farmers with your taxes. Do you think ethanol is the answer? If so, why is there a 47 cent tariff on ethanol from Brazil? The government is causing your problem and you expect them to fix it?