08 January, 2006

A meteoric rise

Last year was a pretty remarkably bad year for oil markets. That is, "bad" if you are a consumer of oil. Good if you are a seller somewhere along the supply chain. Observe this amazing performance:
(Apologies for the low quality. Blogger insists on resizing the figure and converting it to a jpeg. I am unspeakably annoyed.)

Aside from a few hiccups along the way, this is a pretty astounding, exponential climb in price, 2.5-fold in only two years. This is amazing behavior for a commodity. For some perspective we can look at data from the Bureau of Labor Statistics. Here's the average price for fuel oil in the U.S. compared against white bread for the past three years:

Meanwhile, here's the behavior of the same two commodities during the 1990s:
This is not quite indicative, since the price of fuel oil in the U.S. is subject to many non-market forces, but it at least suggests that there's a sea change going on in the oil world. It ought to be an interesting year.


i haven't seen this discussed in political circles as yet - doesn't mean it hasn't been OC. i'm sure it's been out chewed over in greener pastures. "this" being, the oil companies now have more lobbying money than nearly anybody. without  the windfall we got hands-off policy toward the saudis and military actions. i imagine some kind of other goal would be elimination of consumption controls? what will they be buying with the money? 

Posted by david

My guess would be offshore exploration and drilling in the U.S. A more frightening possibility, prevent public-sector investment in renewables. This is a winning situation for oil companies, so long as there's nowhere else to run. Might be smart to keep it that way. Of course, we haven't HAD any public-sector investment in renewables to date, so maybe they don't need to bother. 

Posted by saurabh

somehow i couldn't think for myself that day. here would be my short list.

1) the healthy profits and air quality act.

2) every object the federal government uses must be made of plastic by the year 2026.

3) a new astroturf PR campaign. "america must defend her precious liquid liberty."

4) buy out all the paper bag manufacturing companies and close them.

5) buy some media companies. maybe all of them. 

Posted by david

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