Friday, May 29, 2009

On the rise

Gee, didn't see this coming during the summer driving season.

The price of crude oil once again seems to be defying the economic forces of gravity.

There's plenty of evidence to suggest prices should be falling. In industrialized countries, storage tanks are overflowing, with enough supplies to cover 62 days of use, about 10 days more than usual. Economic weakness continues to depress world demand, which is on track to fall for the second consecutive year. And oil-producing countries, while restraining output, are adding to production capacity. New Saudi Arabian wells coming on line this year will exceed the entire production capacity of Texas.

But instead of dropping, the price of crude oil rose to more than $65 a barrel yesterday, the highest in more than six months. And some analysts said it could rise even higher as the summer driving season arrives. Saudi Arabian Oil Minister Ali al-Naimi said this week that a $75-a-barrel price was within reach.
I'm no expert of economics, but it seems to me that the so-called forces of the marketplace can be manipulated by the super rich. If that's the case, then aren't the only people who face any real risk in the market the nonrich and unconnected people who are foolish enough to wander into the market and hand their money over to the super rich? And isn't "playing the market" just a matter of trying to guess what the super-rich are going to do next?

Take a look at the following charts, from the Energy Information Administration. Together, they cover the past three years, including the 2006 midterms and the 2008 presidential election (click the charts to enlarge).

Look at what happened to the retail price of gasoline right before November 2006 and November 2008: It dropped dramatically, only to go back up in time for the summer driving season. To be sure, I've made this point before (here, here, here and probably other times as well), but I wanted to post an updated chart that showed what has happened to prices since the election. Sure enough, they're on their way back up. And the Post article referenced above cites analysts who think the price of oil is going to keep climbing. You can track the retail price of gasoline here.

One other, unrelated, thing from the Post article to note: It seems that Ocean City, Md., has an interesting way of tracking the number people who visit the town.

In the Washington area, more people appeared to have taken to the road for the Memorial Day weekend; the beach resort of Ocean City, using wastewater use to track the volume of toilets flushed, estimated that it received more Memorial Day weekend visitors than it had since 1993.
Or it could mean that the quality of seafood in the Atlantic isn't what it used to be.

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