Due to a tragedy in the family, this post will be short and bittersweet.
—Dave
The Nymex oil price for the front month contract sits at $105.50. The speculative episode which I described in my previous report has not ended. Rather, it got fresh legs during the last week despite the tragedy in Japan and the intervention in Libya.
Oil Alarm Level — Orange
We are told there is a "risk" (or "fear") premium in the oil price. We are told speculative (paper) oil or grain trading is an essential part of global energy or food markets. It doesn't matter that higher gasoline prices squeeze American families who have little choice about fuel purchases. (Economists will tell you that the price elasticity of gasoline demand is very low in the short-term.) It doesn't matter that volatile oil prices crimp business decision-making.
No one seems to care that higher food prices in various poor countries is a matter of life and death. It doesn't matter that 40% of America's corn crop goes toward fermenting moonshine to put in your gas tank while people starve in other parts of the world.
I yearn for the good ole' days (pre-2007) when we knew (more or less) what the price of oil was. I yearn for the days when supply & demand drove the price. I yearn for the days when unregulated gambling was not our society's chief economic activity.
In short, I would prefer to live in a society which has not gone insane.
Watch CBS News' Playing the oil prices money game. Also see my March 11th post The Oil Price — Everybody Has An Axe To Grind.
Regarding my next report in 2 weeks, I see no reason why the oil price should not be at least as high then as it is now.
> In short, I would prefer to live in a society which has not gone insane.
With that, you've pretty much said it all...
Posted by: Davydog | 03/26/2011 at 02:05 PM