Are Energy Prices 'Pegged' To Hard Money?

Tyler Durden's picture


Energy prices are soaring (though down a little this week). However, a strange thing has occurred since the lows in 2009 and the lows in 2011 - both indicative of coordinated and massive central-banking largesse - Oil prices in hard-money have been extremely range-bound. In fact, the price of Oil in Gold and Silver has been rather coincidentally stable over this period - we leave it to the reader to consider the global energy-producing nations' implications of a hard-money 'peg' for energy prices - as Central Banks attempt to inflate their way out of trouble.

Oil - priced in Gold (average 0.0675 oz per barrel of oil - range +/-1.5 sigma)


Oil - priced in Silver (average 3 oz per barrel of oil - range +/-1.5 sigma)


Charts: Bloomberg

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Tue, 09/04/2012 - 15:06 | 2761435 JawsMusic
JawsMusic's picture

Gold Bitchez!

Tue, 09/04/2012 - 15:12 | 2761461 Haager
Haager's picture

Usually yes. But anyone should remember: The actual display of "value" is fx-ed, missing any consistency. Only physical contains consistent value.

Tue, 09/04/2012 - 15:21 | 2761490 MillionDollarBonus_
MillionDollarBonus_'s picture

Unfortunately for goldbugs, forward freight agreements are priced in dollars, NOT gold, so goldbugs and silverbugs will have to give up their dreams about becoming kings of the universe. The US dollar will remain the world's number one safe haven choice, despite the hyperventilating rants of nerdy libertarians and lunatic conspiracy theorists.

Tue, 09/04/2012 - 15:26 | 2761502 LawsofPhysics
LawsofPhysics's picture

You are getting weaker.  The BRICs are already dealing with each other, in their own currencies.

Come on, give us somthing we can really laugh at.

Tue, 09/04/2012 - 16:59 | 2761514 Ghordius
Ghordius's picture

Draghi's temper tantrum a la Hank Paulson?

Tue, 09/04/2012 - 18:51 | 2762295 theXman
theXman's picture

I'm both a chart reader and a PM bug. The above charts seem to me that oil will go higher in terms of oz of gold and silver. I also believe that gold and silver prices are going higher, also based on chart reading. In other words, oil price in USD will get a lot higher from here. Today's oil price is a lot closer to bottom than top. I am quite confident that oil will be $200/barrel by 2016. Even $300 is possible at the peak.

Tue, 09/04/2012 - 15:46 | 2761557 Bunga Bunga
Bunga Bunga's picture

Don't worry, Iran will be forced to use Dollars again.

Tue, 09/04/2012 - 16:00 | 2761596 Spastica Rex
Spastica Rex's picture

The only thing getting weaker is the comedy. It's like listening to Henny Youngman tell the same joke over and over, day after day. It's funny maybe the first ten times. After that, not so much.

Tue, 09/04/2012 - 15:37 | 2761531 Dr. Richard Head
Dr. Richard Head's picture

I am going, allegedly, to take your posts and shove them in your ass.  For good measure, I will use some fiat to wipe up.

Tue, 09/04/2012 - 15:44 | 2761547 Bunga Bunga
Bunga Bunga's picture

Troops and drones stand united to force the rest of the world to use worthless paper notes.

Tue, 09/04/2012 - 15:51 | 2761570 ejmoosa
ejmoosa's picture

Unfortunately for you, even a billion dollar bonus won't mean what it used to.


But an ounce of gold or silver will always be an ounce of gold or silver.


Tue, 09/04/2012 - 16:36 | 2761751 ParkAveFlasher
ParkAveFlasher's picture

And Kitco's platinum historical charts just timed out.  Too much traffic.

Tue, 09/04/2012 - 16:02 | 2761602 mick_richfield
mick_richfield's picture

Precious metals people don't want to be Kings of the Universe.

Real money is exactly money that can't be controlled by tyrants.

Tue, 09/04/2012 - 16:13 | 2761627 JohnKozac
JohnKozac's picture

house prices down 36% from the peak.

... USO up over 50%;

...GLD up over 200%;

...SLV up almost 300%.


Those who refuse to hedge with Hard Assets are losing out

Tue, 09/04/2012 - 16:55 | 2761818 KingTut
KingTut's picture

You are not paying attention.

If the Saudis charged 2.5/1000 th of an ounce per barrel, their 100,000,000,000 barrels sold so far would give them the same 8113 tons of gold that the US has.

There are ways to eastablish a private gold standard without the Government having to acknowledge it.

Tue, 09/04/2012 - 18:02 | 2762077 steve from virginia
steve from virginia's picture




In the nothing for something economy, what Saudi gets for its oil is empty promises.


The oil is turned into useless gases in the atmosphere, fair trade!


Let them trade gold for oil, nobody will give up their gold. Nobody needs to drive (Saudia won't sell any oil.)


An excess of credit flowing toward oil and it (oil) becomes unaffordable, how much is too much credit? Whatever that amount is it becomes less with the passage of time (because maturing debt must by retired by taking on more new debt).


When currency = oil, there is the currency shortage and nobody gives it up either (Saudia sells no oil). No matter where you turn Saudia sells no oil and that means nobody uses it either.


Conserve energy = buy gold.



Wed, 09/05/2012 - 02:58 | 2763543 BeetleBailey
BeetleBailey's picture

LOL....MDoucheB...what a total cunt you truly are.

Tue, 09/04/2012 - 15:30 | 2761511 Silver Bug
Silver Bug's picture

Oil and gold most definitely are. They have always historically been.

Tue, 09/04/2012 - 17:43 | 2762013 Stuck on Zero
Stuck on Zero's picture

Peak oil.  Peak gold.


Tue, 09/04/2012 - 15:06 | 2761436 Mr. Mandelbrot
Mr. Mandelbrot's picture

Yes . . .

Tue, 09/04/2012 - 15:06 | 2761437 ejmoosa
ejmoosa's picture

That's the way it's supposed to be. 

Why should anyone settle for cheap paper if they do not have to?


Tue, 09/04/2012 - 15:09 | 2761447 LawsofPhysics
LawsofPhysics's picture

Sort of, but OIL is a reserve currency by itself (if you have oil, you can do lots of things to create wealth), so one might say hard money is tied to energy sources instead.  Oh yeah, bitchez.

Tue, 09/04/2012 - 15:30 | 2761508 Dr. Acula
Dr. Acula's picture

No. Oil is not a currency. I can't walk down to the supermarket and exchange a barrel of oil for groceries.

It can be a store of wealth, though. As can tubes of dentrifice.



Tue, 09/04/2012 - 15:55 | 2761579 LawsofPhysics
LawsofPhysics's picture

"I can't walk down to the supermarket and exchange a barrel of oil for groceries."


So fucking what, without any oil you wouldn't get to the fucking market or even have the selection you do at the market.  Sorry, did you have a fucking point?  I have traded diesel with folks next to me already for things, so you are quite wrong on that point as well.  

Tue, 09/04/2012 - 17:56 | 2762066 Dr. Acula
Dr. Acula's picture

>Sorry, did you have a fucking point?  I have traded diesel with folks next to me already for things, so you are quite wrong on that point as well.  

Then it sounds like diesel is a barter good. Not a currency.

"LawsofPhysics", I suggest sticking to physics. Economics does not appear to be your forte.


Tue, 09/04/2012 - 15:59 | 2761588 laozi
laozi's picture

It can be used inbetween nations to settle deals. Wtf... Didn't you see Mad Max?

Tue, 09/04/2012 - 17:45 | 2762018 Stuck on Zero
Stuck on Zero's picture

I thought water was the most precious commodity in Mad Max.

Tue, 09/04/2012 - 15:10 | 2761450 The worst trader
The worst trader's picture

Who turned on the BTFD switch?

Tue, 09/04/2012 - 15:12 | 2761460 101 years and c...
101 years and counting's picture

when was it ever turned off?

Tue, 09/04/2012 - 15:13 | 2761464 Conman
Conman's picture

It was never turned off..

Tue, 09/04/2012 - 15:13 | 2761465 fonzannoon
fonzannoon's picture

No one turned it off. All the bullshit about a sept selloff was just another creation by cnbc so we could "climb another wall of worry" and they can celebrate the power of the markets to overcome adversity as they play rock music and sound bytes by asshole "economists".

Tue, 09/04/2012 - 16:23 | 2761679 ParkAveFlasher
ParkAveFlasher's picture


This Labor Day I sat at the picnic table with my father (67 years old, truckdriver, can not retire).  He has a mortgage with Hudson City (now M&T) and my mother exclaimed that he can't get his money out of his Fidelity account. Good times.

One of his other sons is moving in with his three kids, because they just took out a loan to add a third bedroom and need a place while the "renovation" takes place.  The "renovation" will cost approx. 40% of original price of the house.  They can not compete in their market otherwise, so they are risking that just to get a sale. Good times. 

One of his other sons traded tech stocks for UBS on the floor of the exchange until 2007.  His wife has recently gone back to work as a school teacher, because their property taxes are so high that at the rate they pay them, they are losing the equity in their homes and must have either more savings or higher pension.  Good times.

They all ask me if I'm back on drugs when I start talking about precious metals.  I seem to be the only one having a crisis of confidence.

Tue, 09/04/2012 - 16:25 | 2761688 Don Keot
Don Keot's picture

Fox Business is also fitting that description.  F_ _king cheer leaders.

Tue, 09/04/2012 - 15:13 | 2761468 Haager
Haager's picture

Sorry, I did. Thought it was the Burn-That-Flat-Down switch.

Tue, 09/04/2012 - 15:11 | 2761459 101 years and c...
101 years and counting's picture

when its all priced in fiat, it does appear that way.  the less your fiat is worth, the less real things you can purchase.

Tue, 09/04/2012 - 15:12 | 2761462 SaveTheGreenback
SaveTheGreenback's picture

The dollar should be pegged to a basket of currencies...


Oil (energy), gold, and silver should be in the basket...


There isn't enough gold or silver to back $16 trillion of debt at today's price....but, there is probably enough oil and natural gas...



Tue, 09/04/2012 - 15:14 | 2761471 fonzannoon
fonzannoon's picture

At todays price? No, At their correct price....yes.

Tue, 09/04/2012 - 15:19 | 2761480 SaveTheGreenback
SaveTheGreenback's picture

At the correct price, we all become serfs (unless they let us keep our metal)   :)

Tue, 09/04/2012 - 16:26 | 2761696 ParkAveFlasher
ParkAveFlasher's picture

They can come and try to get it. 

At the correct price, we all become enlightened.

Tue, 09/04/2012 - 15:20 | 2761485 LawsofPhysics
LawsofPhysics's picture

Right, now about the 700+ trillion dollar CDS market....

Tue, 09/04/2012 - 15:36 | 2761530 Ghordius
Ghordius's picture

it's a fantasy. a trick. a garbled mass of contracts to be banned. a price cartel hidden in plain view. a scam. the supreme ponzi

Tue, 09/04/2012 - 15:50 | 2761568 LawsofPhysics
LawsofPhysics's picture

Thanks captain obvious, do you have any information I can actually trade with?

My "contrarian" prediction is that the banks all get to gether and "call it even".  wiping it all out, with no consequence (to them), then the printing and inflation really gets started in earnest.

Tue, 09/04/2012 - 17:06 | 2761858 Ghordius
Ghordius's picture

what part of "it's over" and "the last forty years were special" did you not understand?

you won't make the same sort of money by "trading" anymore. except if you have immense databases that give you the shape of how the others are positioned (the above mentioned trillions). and even those five banks will struggle

and you can forget about "shorts". go long and hold on what you think will be fine in ten, fifteen years. keep liquidity ready. that's it

your prediction might work on sovereigns or on banks being forced by sovereigns. the banks themselves? they believe in their own propaganda

Tue, 09/04/2012 - 15:33 | 2761521 PiratePawpaw
PiratePawpaw's picture

"There isn't enough gold or silver to back $16 trillion of debt"

I have heard this arguement before, and it makes no sense. You divide the ammount of fiat backed by the ammount of STUFF you are backing it with and that is the value of STUFF in fiat terms .You could back all the worlds currencies with one special magic paperclip if you wanted to. It would just be a REEEEEEALLY expensive paperclip. In terms of fiat.

Tue, 09/04/2012 - 15:55 | 2761582 SaveTheGreenback
SaveTheGreenback's picture

Yes, except I said at today's price

huge difference....we all know the price of gold and silver is depressed severely...


Tue, 09/04/2012 - 16:27 | 2761707 ParkAveFlasher
ParkAveFlasher's picture

And watch platinum.  Up $20 today.

Tue, 09/04/2012 - 23:27 | 2763190 StychoKiller
StychoKiller's picture

BDI went below 700 today.

Tue, 09/04/2012 - 15:46 | 2761551 Vagabond
Vagabond's picture

The other posters handled your idiotic gold/silver claim.  Now about oil and natural gas... What kind of an idiot would use a flamable commodity that gets "used up" as currency?  Please review Aristotle's #1 quality that makes for good money, and put in some thought to your next "save the world" idea.

Tue, 09/04/2012 - 16:15 | 2761637 mick_richfield
mick_richfield's picture

I burn money all the time, man.

Tue, 09/04/2012 - 16:20 | 2761644 SaveTheGreenback
SaveTheGreenback's picture

Yeah, using the world's most valuable and precious commodity as a currency-base is a terrible idea.  Keep reading Aristotle.  He was a smart guy who, I'm sure, contemplated the future of human technology and transport: autos, gasoline, and airplanes and the fuel they require.

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