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On Future Oil Prices And The Economic Deterioration Should Crude Follow Gold's Surge
With the value proposition of sell-side research now completely gone, as most of it has become merely a conduit for shot gun propaganda (is there even one sell on Goldman's most recent conviction list?), third party research shops such as Credit Sights are promptly becoming the only objective and impartial sources of analytical insight. In its January 3 market commentary Credit Sights shares the first semi-official view of the adverse consequences to the economy should the current liquidity surge from the Fed not be moderated (and with such pundits as Fred "Dynamite" Mishkin telling Bloomberg earlier today that QE3 will not come, it is guaranteed that QE3 is imminent). In a nutshell: "a rising oil price creates economic headwinds via numerous channels
particularly if the increase is sudden. A decline in disposable incomes,
reduced consumer confidence, lower levels of travel, a decline in
demand for gas-guzzling larger autos and an upward bias to inflationary
expectations are all spin off effects on the consumer of a rapid ascent
in the price of oil." Which is why as liquidity continues looking for paths of least resistance, and finds them in such places as commodities (especially now that China has all but shut down the door to importing US liquidity) it is precisely the risk of a price spike in crude that is rapidly becoming the biggest risk to the "wealth effect" derived from the continued lunacy out of the Fed.
That said, the crude market has long been one in which analysts realize that there is a massive disconnet between fundamentals and reality: if based on actual draw downs, the price of oil would have to be far, far lower. But when is that last time fundamentals mattered in anything. Here is where Credit Sights sees oil going in the next year:
With inventories, according to the US Department of Energy, sitting 4% above the comparable period last year and 8% above the five-year seasonal average, the CreditSights Oil & Gas team considers there to be little in the supply/demand balance that suggest prices will spike and stay at significantly higher levels in 2011. We expect prices to trend higher than in 2010 however, on the back of the more robust demand conditions currently being factored into forecasts. We expect that in 2011 oil prices will trade a $75/bbl-$110/bbl range with increased volatility but think it unlikely that the year-end average 2011 price will be in the triple digits. We note the conservative bias in our forecasts relative to mainstream market commentators given the follow on effect that the oil price has on our expectations for the cash flow and credit metrics of companies in the oil and gas sector.
So with fundamentals irrelevant, what is? Well, the value of the dollar for one. And as QE3 is rolled out the impact on the dollar will be anything but favorable.
Typically, those forecasters that are painting a picture of much higher prices throughout 2011 are not doing it on the back of divergent expectations about the supply/demand fundamentals. The effect of speculative trading and the impact of currency movements, most notably US dollar weakness, are prominent. In 2007, 2008 and 2009, the trade weighted value of the US dollar had a statistically significant inverse correlation with crude oil prices – a marked change from the 2000-2006 period. But in 2010 that correlation has fallen in an environment of greater currency volatility. That makes the impact of the dollar on oil prices in 2011 more difficult to ascertain as the outlook for the US currency is clouded. While the path of least resistance may be for a lower dollar given the Fed's monetary policy stance, the role of the dollar as the world's reserve currency - and hence a store of value that benefits from the flight to quality trade in times of heightened risk - cannot be ignored given the ongoing sovereign debt crisis in Europe. In 2011 we expect significant currency volatility and therefore believe the oil/dollar correlation over the course of the year will once again be relatively low. Nevertheless, the representation of short-term dollar weakness as a factor driving oil prices higher is likely to continue, particularly given comments by producers that differentiate trends in nominal dollar prices from the more subdued rise in "real" prices. Oil prices north of $100/bl are already being justified by producers on the back of the dollar's decline in 2010.
So if Bernanke were to succeed in further destroying the dollar, which is now collateralized by a whole lot of empty houses and taxpayer funded mortgages, the first thing that will be impact is the possibility of actual organic economic growth.
If our forecasts of even modest increases in the oil price are realized then the US consumer will be paying considerably more at the gas pump in the coming year than was the case in early 2010 and that will necessarily have an impact on their hip pocket. Although the impact of higher oil prices on the US consumer – and by default the US economy – is often mentioned, it is rarely quantified. This is partly because it is a somewhat amorphous relationship with far more nuances than can be addressed in a catchy headline. What is often reported is that the US uses approximately 20 million barrels of oil a day, with about 45% of that being used as gasoline for motor vehicles. If you assume that each barrel of oil produces 20 gallons, then the amount of oil consumed for driving in the US is 180 million gallons per day – or 65.7 billion per year.
This generates an impressive annualized number when talking in terms of the price impact for each $1 increase in the price of a barrel of oil and there is no denying that rapid increases in the "gas tax" do have an impact on consumer spending behavior. Few would argue that such a direct translation is accurate however, given the elasticity of gasoline demand and the significant potential for consumers to modify their behavior. Nor are empirical studies of the consumer effect of changing oil prices definitive given changes in the US economy's fuel efficiency, the overall impact of the most recent decade of low inflation and ongoing societal shifts on the back of technological developments. Nuances aside, a rising oil price creates economic headwinds via numerous channels particularly if the increase is sudden. A decline in disposable incomes, reduced consumer confidence, lower levels of travel, a decline in demand for gas-guzzling larger autos and an upward bias to inflationary expectations are all spin off effects on the consumer of a rapid ascent in the price of oil. These are among the impacts to search for should oil move outside of our forecast range early in 2011 and remain at elevated levels.
Bottom line: tax cut extension, meet gas tax. But at least everyone believes they are getting a little richer (on a nominal basis) even if all the real money is going straight into Wall Street's 2011 bonus accrual. Same as it always has.
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Would Goldman dare sacrifice Harry Wanger in the search for higher profits?
GeminiRX,
You fail to understand because you presume criminal syndicate Wall Street bankers are all long stocks for the next three months. I assure you, and based on trading in Leadership Stocks that I have watched closely over the last four weeks, this is not the case.
Oil therefore could be the catalyst for the correction coming...although it is so stupid and transparently obvious that it is kind of funny how criminal bankers have chosen oil to kick things off. Then again, I have come to understand that bankers really are not the brightest bulbs on the tree. Stupid herding animals if you ask me.
Even just this morning, the syndicate was pants'd by both Larry Kudlow and...wait for it...Ms. Erin Burnett. So how smart could bankers really be? Funny stuff, really.
These banker masters of the universe do strike me as the biggest herd animals of them all. Theyre told what to think, say, and do...I think theyre the biggest pawns in this whole Fantasymerica. Oil really seems like the PERFECT 'kick off' for some major correction coming...blame the arabs again, certainly wasnt Wall St or the presidents fault...those sly little ninjas in caves got us again!
Well I hope the clip shows up later on youtube or something, sounds hillarious.
I'll gladly toast to a much needed correction!
You don't need the clip. It's like this:
Ms. Erin Burnett made a comment this morning that revealed Goldman Sachs for what it is. She commented on Goldman's investment in Facebook. Goldman has rationalized the investment by giving Facebook a $50 billion market value, to which Ms. Burnett mentioned that this was a bigger market cap than...Boeing. You see, dumb criminal syndicate Wall Street bankers strike again, and folks who work for Boeing numbering about 150,000 should take notice while the 200 or so that work at Facebook LOL.
Now, take the oil issue. Criminal syndicate Wall Street bankers are the guys saying $100-$150 per barrel is right. In the meantime, we have the stuff pouring out our keesters because DEMAND was DESTROYED two years ago. But never mind about that, bid it up with futures [along with every other commodity price] while SIMULTANEOUSLY CLAIMING THERE IS NO INLFATION which allows the syndicate king to keep printing...until Larry Kudlow points out that folk shorting King Dollar are causing this stuff to happen via the short dollar/long commodity group on Wall Street [you know, the guys receiving all those free King Dollars?]
Ergo, and on this day, Larry Kudlow and Erin Burnett pants'd Jan Hatzius and the entirety of Goldman Sachs. Now I know none of this is a surprise to most of the peeps on ZH...but nonetheless, these things happened today on the Blow Horn [CNBC]...which is why I mentioned them.
Dog, I am looking for an outside day on oil...which will be followed by this commodity collapsing in price, perhaps $8-$9 on a follow on day...despite guys who appear at times like this shrieking "Peak Oil!"
...which is why I pinged you. You with me? Oil is a complete joke right now.
Cdad
Cdad, I couldn't agree more.
And on the Facebook valuation; I am eerily reminded of the literal dot.com irrationality of the '97 to '99 period.
We're looking at the third or fourth largest bubble, completely detached from fundamentals, in history.
Fundamentals always catch up to and pummel fantasies, with or without governmen/central bank games & intervention. The only question is the when.
Truth,
It is pretzel logic. It cannot work. You cannot claim that you need counterfeit dollars from the Fed to hold the economy together saying inflation does not exist [during a period where inflation is hurting folk coast to coast] while also calling for higher oil at the very same moment in time that supply and demand characteristics are still lopsidedly bearish...while also simultaneously claiming that inflation cannot appear because the economy is too weak to create it....
Being pants'd by Larry is only the cherry on top of it all, with Larry Kudlow simply calling out Jan Hatzius and how he can simply short the dollar to GET WHAT HE WANTS. Larry simply revealed him.
On the Erin Burnett issue and dotcom...agreed. E. Burnett simply called out Goldman for pricing Facebook where they have. Of course, we all know what Goldman is doing...which is frontrunning Facebook prior to it going public. But the important point is really about the systemic nature of Wall Street's corruption...which, in this Facebook case, results in massive malinvestment.
Funny...all of it...because it took E. Burnett to finally engage her brain, after two years or so of mindlessness from her [shopping and camels and bras on her face], to finally point out the potential price of this tendency in Wall Street to drive all capital into the wrong places as it frontruns the nation into the ground...which may cause 150,000 Boeing employees to wonder how much longer they have before they have to answer to 200 Facebook employees. I hope Boeing has a Facebook page.
And all of this is, of course, just one of many Wall Street born illnesses that has destroyed the American economy over the last 30 years...all this on a day that Blight on America is leading the DOW because 2 billion dollars in fines sounds like a steal.
You with me?
Full Disclosure:
I am long Boeing [3 days now] and short dotcom by names other than Facebook.
Bingo!
U.S. Imports by Country of Origin Jul-10
All Countries 390,649
Persian Gulf 52,045
2011 is starting out on a bad note for me.
The longs which I held are the ones which were not overextended.
Deepwater drillers like DO, NE, etc. and various gold stocks which are still in a consolidation.
All of these stocks are woefully underperforming today, especially the golds.
I pretty much missed out on the Rare Earth, Coal, and Steel bubbles this time.
Gold Bugs must be stunned, dazed, confused
RobotTrader - Mon, Jan 3, 2011 - 12:03 PM
Yet another year where materials stocks are vastly outperforming gold stocks.
The biggest explosion in fiat in world history, yet gold stocks are woefully underperforming.
Eric King must be scratching his head.
Seems like every bull cycle, there is a mania in some sector.
But it never occurs in the gold sector. Never!
Image #1:
Image #2:
Image #3:
Sold my MCP about a month ago :( It's a bubble, but it might not collapse for 10 years. How much money are goverments going to waste on unstustainable technologies is the question.
I'm pretty sure you have been told multiple times to stay away from any form of paper gold, including stocks in miners. Go long the physical metal, and forget about it.
The returns I saw in physical silver last year leave me shaking my head at you.
Yes, silver had a good run.... I am amazed that someone who gets why Silver is a screaming buy completely screws up the fundamentals of oil....
Not the fundamentals. The Peak Oilers are simply overstating the contribution of the rise in the price of oil to this crisis. I posit that the rising price has been an EFFECT, rather than a cause. This is clearly illustrated by the fact that gold and silver led oil's rise in price by some six years. If this was a peak oil crisis, oil would have lead gold and silver up, and the price of oil in terms of gold would be much higher right now, instead of sitting around the 50 year average.
This is a MONETARY crisis. Any attempt to pass this off on peak oil gives the politicians and bankers an out. They can seize everything in the name of "saving" us from peak oil.
Nobody is trying to save anyone from peak oil. The monetary crisis is intimately related to peak oil. If anything it is used to keep the sheeple from seeing what is really going on. Gold peaked in production before oil, it is also much easier to store and hold. I am not surprised that it has outperformed. I have a roll of Kruggerands sitting in front of me, the equivalent in oil would more than fill my living room. Gold is considerably more liquid, pun intended.
And, I am invested heavily in both.....
Gold supply is (approximately) constant, because it is not used up. Decreasing gold production only has the effect of removing a constant downward pressure.
Silver production hasn't peaked, and it lead much more strongly than gold.
This is the other problem I have noted among peak oilers--they don't understand what makes gold money. They don't see that it is not used up. They think they can just compare it straight to oil without a problem, but it's apples and pieces of eight.
I been long coal for some time, up 50 or 60% on the ARLP trade so far.
As it stands, however, I called a double bottom on BAC down in the 10s but did not place the trade long...HUGE mistake.
It looks like a shit bank breakout to me, which could mean long the phonebook. BAC up over 6% today, got to be insider discounting of something, perhaps a QE3 where the Fed buys all the shit putbacks.
I'm long physical metals but still dancing the fools' dance with 10% of risk capital (minus real estate), since you're long "the market", Robo, why wouldn't you ride the irrational wave of rare earths? AVL and MCP have made me much paper (freely convertible to gold, or a BMW 5-series) in the last two months. With the average holding time of the market being 22 seconds, why not ride a wave for a few hours and cash out 5% up for the day? Good luck Robo, I shall not junk thee.
Nothing like an oil story to drag out the faith-based crowd....
It's real fucking simple. Look at the WTI-Brent spread, look at the Diesel-Gas spread. Yeah, there is some spare capacity out there, there is no refining capacity for it though. The catch-22 is that by the time the refineries are reoptimized, the flow of light sweet crude will be less, resulting in yet another mismatch.
There is maybe 10 hrs or so of world supply sitting in tankers that aren't moving. BFD. People talking about Cushing inventories are being myopic and backward looking. The US is no longer the swing-demander, that baton has passed.
A few here get it... most don't. The dollar is back by oil: oil is the fundamental currency through which economic activity is levered.
The only way people are getting screwed by oil is through their delusions about some god-given right to have cheap gas. Get over it, those days are gone forever. To put it in perspective, the energy in a barrel of oil converted in man-hours of labour at the minimum wage is about $27,000.
Oil and Gold, bitchez....
I see a coward came and junked... show your face, chickenshit. Or you don't like to argue with someone that will rip you a new one?
Would you care for some cheese with that whine?
Hardly a whine, just calling out some faceless cur.
While we are at it:
1) Explain why we are replacing reserves at 1/4 the rate at which we burn?
2) Explain why Brent, an inferior grade of oil, is trading at a $3.30 premium to WTI?
3) Explain why we have increased the number of oil wells by ~20% over the past 4 years and why the flow per well has decreased by about 20%
Plenty of people get junked by a single person. Most don't shit their pants in indignation over it. It only makes you look bad.
Dunno about the first two (especially why you think that a crappy type of oil trading at a premium to a good type means that oil is scarce--the price of both should be pushed up at the same rate), but I would venture to say that the explosion in price has made a lot of marginally productive areas worth drilling for oil. You don't need as much oil to cover costs. I have an uncle who has made some money investing in such small wells. He also does some prospecting in his spare time.
The profile is similar to that of silver, where the fast rising price has pushed a lot of exploration and production in areas that don't have great silver deposits. It has also turned a lot of base metal mines into silver mines purely by virtue of the dollar value of the silver rising faster than that of the base metals. No actual changes in production occurred at in these mines.
You made my point.... the marginal wells are just that, marginal. Sure some small producers will do very well, but in the grand scheme of things, it makes almost no difference to the supply.
Brent trades at a premium because it is deliverable anywhere in the world, not Cushing. The premium reflects the demand that is out there. US demand does not drive the markets like it once did.
There are no silver mines. Silver in any appreciable grade will be either with Gold or Lead-Zinc. The Pb-Zn grades are from 3-15%, that is what pays the freight. The Silver is gravy. For even the best producers, it costs at least ~$150 per tonne of rock to process it, most silver grades are at the order of 200 g/tonne or about 7 oz. Do the math....
No, you don't get my point--using new wells that were drilled by little guys without the use of extensive exploration are always going to produce less--these are the kinds of wells that are being drilled now by people looking to profit from the higher price of crude. The big boys aren't the ones drilling the marginal holes. Honestly, I don't really see a reason for them to even report new discoveries, as such information would lower the price of oil and kill their current profits.
You second point is well taken, but it is an indication of a United States depression, not peak oil.
And yes, there are (a very few) silver mines (ie they get at least 50% of their revenue from silver). There were seven last time I looked, some two years ago. Certainly, they produce other things, Hecla produces lead, as I recall, which is profitable enough by itself to make the cost of silver recovery zero (or negative). Now, this is the case now, at relatively low prices. As prices balloon, many old silver mines that don't have veins full of copper or lead will be able to come back online as the price of silver justifies the processing cost in and of itself. Also, don't make the mistake of thinking that ore costs the same amount to process everywhere. That will lead you down the path of the labor theory of value.
Flak;
Silver mines:
Some in Mexico and Peru have been producing Ag & Au for 400 odd years.
Are you suggesting that all this was simply inciidental as a by product of iron mining or perhaps rare earths, titanium & molybdenum to supply the hi-tech industries of 15th century Spain? There was also much Gold with the Silver.
Mercifully, the Spaniards had to do without Barrick's "help".
Well aware of that... a lot of great plays in the Silver sector are reworks of old mines. The indigenous natives were dealing with silver ores at the level 3000-5000 g/t, i.e. you could see the visible mineralization. Those types of ore are long gone (except for the occasional small strike). To give you an idea, there was a gold rush in the Carolinas that was spurred by finding a 17 lb nugget of gold... Not too many of them laying around nowadays.
Hell, one of my pet plays, NWM.TO, is literally using the waste rock from Mexican mines worked 80-100 yrs ago. Silver yield is about 200-300 g/t with lower processing costs.
Two junks... and no answers to my questions, pretty much sums things up....
So, long OLO, and long MAN (better margins) is the convergence trade?
Don't know about that... but I did pick up some Rickshaw futures on the Singapore exchange.
You don't seem to understand the significance of people renting oil tankers to store oil. It means that there is no on shore capacity! People are filling up their bathtubs with oil! It costs money to rent a tanker to hold oil, a LOT of money. This means that when the tankers start being used in this way that every other means of oil storage is already taken.
Why is it that oil reserve drawdowns are a sign of the end of the oil age, but huge increases aren't worth mentioning? That is called bias.
False premise.
Correlation does not equal causation.
You should learn what a "premise" is before you start using the word.
A premise is a statement taken as fact without explanation. What I had there was a logical progression. The premise is that oil tankers are a more expensive way to store oil than on-shore storage. You'd best refute THAT premise if you want to call my conclusions faulty.
Please educate me. I am no PhD, but it seems that you would have us believe, "...that there is no on shore capacity...," so that you can then make an argument about pricing rationale. I argue based on the data available at the link below (does not even include China) there is indeed on-shore capacity, so is not your premise false?
http://www.eia.gov/dnav/pet/pet_stoc_wstk_dcu_nus_w.htm
I just did. You attacked a logical progression calling it a premise.
Premise 1: onshore storage is less expensive than renting a tanker and storing it off shore.
Premise 2: people who want to store oil want to do so at the lowest price possible.
Logical conclusion part 1: If tankers are being used for storage of crude, then all of the easily accessible storage is either in use or non-accessible.
As such, the claim that oil being stored in tankers is "no big deal" fails to account for the rather stunning logical conclusion above.
I'm not exactly sure what your numbers are. They don't really define themselves very well. Most oil should be stored in private tanks owned by numerous parties, some or all of which don't report their stocks to the EIA. The price of the storage tells the whole story. If renting a tanker is cheaper than onshore storage, then onshore storage must be pretty damn expensive right now. It's like storing grain in an 18 wheeler with a driver in it instead of a granary.
Does it? Is not the storage you speak of priced in dollars? Could it be that the price is up because the dollar is down?
A falling dollar sinks all ships. The price of storing in tankers would be up by the same proportion.
a ship full of oil will sail the falling dollarsea with ease !
A falling USD floats all dollar denominated boats (nominal price appreciation), except for, curiously, the BDIY.
Oh, in case you missed it, there is a glut of tankers on the market. Something to do with net oil exports being down slightly. You can rent single hull tankers very cheaply. Look up the day rates. It is a very nice play for someone with deep pockets and patience. The definition of a speculator is someone buying something that believed to be undervalued. Oil is undervalued.
Well said. Try pushing a car loaded with six people for thirty miles then tell us what you'd pay for it. Then you'd have the value of one gallon.
Use the right tools for the job. Either a horse, or a train engine. You don't just step from oil society straight back into the town of Bedrock.
Thats right, you don't do that. It is only meant to provide perspective.
Think of how many men with hammers it would take to produce the light from a single lightbulb!
That kind of perspective?
"too much fucking perspective" - David St. Hubbins
http://www.youtube.com/watch?v=YnsIxSEx3Yk
Oil is The King. TM, are you're not debating the energy density of oil? Or are you saying, as I think you often do, that there are easy to access alternative sources and delivery systems ready to go without significant transition costs and well, pain?
The energy density of oil is a separate issue. Energy density is something required for fuel for use in vehicles and other highly mobile contraptions, not energy.
The point is that oil isn't going to disappear tomorrow, and there ARE other technologies that are coming online, or that could come online if we smashed the regulatory agencies in the US. These include, in order of rollout, coal, nuclear, and graphene based solar.
The latter will make energy so cheap that it will be practically free. We have in the last two months developed a method for mass producing both perfect and "defect" (important for solar applications) graphene on a massive scale with extremely low energy inputs. This means solar panels that are almost indestructible, need no casing, and only an electrical lead to connect to the grid tie inverter or battery charger, for the cost of a few sheets of newspaper.
Despite the constant dirge playing of the peak oil crowd, the future is bright. We just have get rid of those who stand in its way (the government).
Look up "solar constant" "clouds" "nightime" "morning" "evening" and "latitude" and then get back to us your magical graphene solar cells and the amount of energy they can provide us...
Might want to research storage technologies too unless you want everyone planet wide to work through lunch....that won't go over so well in Europe ya know.
"look up nightime" - funny, I think it's right next to the entry on "windless day" good to see you take the tag Hulk
Due to LACK of demand refineries are shutting down..how ya like dem apples?.
I live in Tx, we have not BUILT ONE new refinery in 30yrs.
And the majors go down for repairs same time every year, and guess what happens?.
You got it.
Another Mammoth Nat Gas field was just discovered in West Texas.
Why in the hell more vehicles are not converted to Nat Gas, is beyond stupid.
Lone Star Gas, was running dual fuel trucks,and cars in the 50's,and 60's!.
To add the option to dual use, would cost LESS than $1k easily per vehicle.
Why not market that?, we have more Nat Gas, than ANY nation on the entire planet.
Why don't you read up on the changes needed at a refinery to go from Winter to Summer blends...Or would you just like to keep believing what you want to believe?
Yes, no new refineries in 30 yrs, however overall capacity has been substantially increased. Reason? Cheaper to upgrade and expand an existing facility than to start a green-field one.
The first car model to run on natural gas should be called the Hindenburg.
Seriously, gas is enough of a problem, natural gas makes every car a bomb, and a 100 car pileup a Holocaust.
this is an easy one...the reason no new refineries have been built is because there isn't going to be MORE oil to refine.
The "slack capacity" out there is all in heavy sour. Our refineries were built for lightsweet, except for some capacity that can refine the taffy coming out of Venezuela (about the only plants on earth that can do this - hemispheric oil strategy).
The cost of building a new plant is very high, and the majors know that heavy sour will only make up an increasing PROPORTION of supplies, but there will still be no additional supply in the aggregate. So it doesn't make sense from a ROI perspective to build new ones here.
Yes, the majors now about Peak. Every well they've ever drilled has hit one. What morons around here and Douchinger claim is "religion" is axiomatic in the oil business.
yup
As always, will inflate the price of everything.
Gas lines and odd/even rationing not far away.
Carter II with way worse fundamentals.
When oil decouples from the USD it's tits up. Is this how it starts?
Ooops.
Yep. We got screwed.
Read the section in this article below about how Goldman Sachs manipulated the price of oil.
http://www.rollingstone.com/politics/news/the-great-american-bubble-mach...
Bubble #4 $4 a Gallon
(Unfortunately, the full Vampire Squid article is no longer available in full.)
double post deleted
Folks, make the investment of your life and buy a moped -- 75 mpg!
Mopeds are less of an investment, and more of an expense.
Buy a good hay field.
Buy a dual. Get a set of knobbies.
If you have to get out of the city/burbs, you can go off-road and avoid checkpoints, roadblocks, mayhem etc.
Old logging road maps are helpful.
the upper 30% of consumers can afford expensive gas and oil. The upper 30% are driving the economy, as corporations have restructured themselves to thrive on that upper 30%. The US govt is stuck with dealing with the other 70%, including their collapsing housing and employement situations.
I am not commenting on the fairness of this, but am trying to explain how corporations and the equity market are doing so well.
The Corps are doing well off of profits from their overseas ops.
The Equity mkts are doing well because of the Bernank's pumping them up.
There is no inflation. The CPI is based on one pair of undies, a T-shirt, and a 50" Plasma TV.
Ahhh, I get it now.
Oil is always 'relatively priced at equilibrium,' so the barrel @ $11 in 1999 was equilibrium, the barrel at $148 in 2007 was equilibrium, the barrel at $35 in 2008 was equilibrium, and if it's $200 this year, that will be equilibrium, too.
What a crock of shit.
Good God.