Saturday, 3 January 2009

Oil madness

For policy makers, there is nothing more treacherous than the price of oil.

It began last year with a frightening surge, reaching $147 a barrel by July, pushing inflation across the developed world to a 15 year high. Then, it suddenly collapsed. Central bankers then began to fear deflation, and they are now frantically trying to keep the inflationary embers from being extinguished. Interest rates across the world have tumbled to historically unprecedented levels.

Could the oil price work its perfidious magic again in 2009? Could it suddenly explode once more, leading to a surge in inflation just has the central banks are hysterically producing unprecedented levels of liquidity?

The oil price still has the capacity to wreck the half-baked plans of backward looking central bankers. This year could be just as mad as last year.


Noble said...

Er... Dont you mean 2009 and not 2007?

Nick Drew said...

less credit available in '09 for punters to be able to go long oil to quite the same extent

dearieme said...

Ah, Nick, but more temptation since their bawbees earn next-to-nowt at the bank.

fajensen said...

I bet speculators are using the abundant, gratis, no strings, no supervision e.t.c. TARP funding to short the oil futures in the hope that OPEC will panic and (actually) cut production.

This would produce a nice smashup when constant demand for oil meets up with real diminishing supply (with a lagging response time of several weeks).

The speculators will be long oil at maybe USD 40 a barrel by then - probably around March/April me thinks.

USD 200++ oil for summer? Possible I.M.O.!

mike said...

No one seems to mention the fact that the US has been storing a lot of oil over the past few years which most likely (in my opinion) caused the prices to increase to abnormally high levels. They were buying up oil in the expectation that it would be a higher price in the future. Therefore benefiting the US economy in the long term. But this sick greed has backfired. Now they have years worth of oil sitting in huge storage tanks for which they paid high prices for. This surely must have a huge drag effect on the US economy.

Anonymous said...

But wasnt there one bank in NY that owned half the oil futures contracts...???

Sounds to me that they were driving the market ever higher until the cash got called in and what youre seeing is now a massive over correction the other way?