If you want to know when the economy is making a comeback, keep a watchful eye on the frequency of high oil and gas price reports in the news.
Throughout 2007 and the first half of 2008, viewers were inundated with high gas and oil price reports on cable and broadcast news. But since hitting $147 back in July 2008, oil prices have plummeted into the low-$40 range mid-January and so has the frequency of doom-and-gloom oil warnings.
However, crude has since rallied into the upper-$50s. And, as crude has rallied, predictions of oil hitting unfathomable heights appear to be making a comeback as well. CNBC's May 8 "The Kudlow Report" considered that $300-a-barrel oil was a possibility.
"Crude oil teetering on the $60 mark, rising today as much as five bucks," "The Kudlow Report" fill-in host Michelle Caruso Cabrera said. "Are we heading toward $150 oil? Could we even hit $300?"
Kevin Kerr of Global Commodities Alert explained $300 oil was still a possibility - since the momentum to drill for more oil, improve infrastructure and develop other sources of energy has waned with the decline in the price of crude.
"Look, $300 isn't going to happen overnight," Kerr said. "But the same situation that we had, when we saw oil prices get to $147 - the same things still exist. We do not have more drilling. We do not have more infrastructure. Alternative energy has basically dropped off the map."
One variable many experts attribute the decline of the price of oil to is the drop in demand, due to the economic slowdown. But Kerr contended the economy is turning around and so will oil's price.
"You know, oil prices have swung all the way back down to around $30," Kerr continued. "Everybody was talking about a $30 sustained oil price or maybe even lower and that's just unrealistic. Demand is starting to comeback. We're starting to see the seeds of a recovery."
Stephen Schork of The Schork Report explained oil's rally last year was nothing more than the creation of a speculative bubble and it wasn't based on true supply and demand.
"Let's go back to a year ago," Schork said. "We did get to $147. That was nothing but a speculative bubble."
One variable in the oil equation Kerr said - inflation. As the dollar weakens with a low Fed funds rates and increased government spending, the price of commodities will reflect expansion of the money supply.
"What was one of the biggest drivers this week for the energy sector - the weak dollar," Kerr said. "It got slammed and what do we see crude do - it rallied right back up. As the dollar keeps dropping, which I think it's going to, we're going to see these commodities prices get some move to the upside."
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Updated by Noel Sheppard at 11:20 a.m.: I wanted to add that the current rally in oil is clearly a revival of absurd speculation ignoring fundamentals. After all, oil inventories are now at their highest levels in almost nineteen years. Add this to reduced demand as a result of a global economic slowdown, and today's prices should be NOWHERE NEAR $60/bbl.
Even with a $10 to $20/bbl geopolitical risk premium, oil should be between $20 and $40/bbl. Readers are encouraged to review Raymond J. Learsy's recent article on this very subject, "Why are We Paying $50 a Barrel for $20 Barrel Oil??"
The only reason oil is now at these levels is because speculators are once again bidding it up irrespective of the current supply and demand. This makes CNBC's $300/bbl discussion irresponsible, for they are once again assisting the oil bulls in driving up energy prices which hurts all of us who are looking to cut expenses in a soft economy.
As last year's run to $147/bbl was clearly a speculative bubble that CNBC helped inflate, maybe these good folks should learn from that and not allow themselves to aid and abet bubble filling again.
Editor at Large
Comments Policy
Obama's Dream
May 9, 2009 - 10:11 ET by allanfThat would be Obama's dream. Impetus to push high mileage go carts on the American people. The American left is bound and determined to restrict oil supplies.
"The Kudlow Report" fill-in
May 9, 2009 - 10:37 ET by MidAmerica"The Kudlow Report" fill-in host Michelle Caruso Cabrera said. "Are we heading toward $150 oil? Could we even hit $300?"
Why not $400 or $500? Any price that is above market forces is just speculators driving up the price. Only a booming world economy or a quicky diminishing supply can drive up prices beyond current levels, both of which, aren't likely to happen soon.
"What was one of the
May 9, 2009 - 11:05 ET by jdhawk"What was one of the biggest drivers this week for the energy sector -
the weak dollar," Kerr said. "It got slammed and what do we see crude
do - it rallied right back up. As the dollar keeps dropping, which I
think it's going to, we're going to see these commodities prices get
some move to the upside."
Actually demand hasn't spiked at all. The crude oil report of this past Wednesday showed that. From Bloomberg: "U.S. crude supplies rose 605,000 barrels to 375.3 million
last week, the highest since 1990, an Energy Department report
on May 6 showed. A 2.5 million-barrel increase was forecast by
analysts surveyed by Bloomberg News.
Fuel Consumption
Total daily fuel demand averaged 18.2 million barrels in
the four weeks ended May 1, down 7.9 percent from a year
earlier, the department said. It was the lowest consumption
level for a four-week period since May 1999.
“Prices were divorced from the market fundamentals last
year and we are seeing that again,” Kilduff said. “We will
have to take out $60 and see if the market recalibrates to
reflect the fundamentals.”"
So what is driving higher prices? It is the fact that the US Treasury offering had trouble this week and was not able to sell all that was offered without first raising the interest rate on the offering. This is a harbinger of things to come. With our Congress going along with president stupid in attempting to run over the free enterprise system with government spending, the rest of the world may not agree. As our government attempts to finance its outrageous spending by offering US Treasuries to the public, that public - read foreign investors - will demand ever higher interest rates. That will bring on inflation, a lowering of the dollar against other currencies and will propel oil prices and all commodities through the roof. Fasten your seat belts, folks, president stupid is attempting to kill our country.
Fasten your seat belts,
May 9, 2009 - 15:06 ET by PaarlFasten your seat belts, folks, president stupid is attempting to kill our country.
////////////////////////////////////////
or as Forest Gump said...stupid is as stupid does...
we are going to enter the economic Big Muddy pretty soon and it just might be the "River of No Return" but as Doris Day sang in "The Man who Knew Too Much"....Que Sera Sera...whatever will be will be....
Sorry for all the hollywood allusions but we ARE living in a Hollywood Production...."The Obama Debacles"..
To paraphrase Cecil Rhodes as he was dying over the last year of his life....Rhodes said.."So little time...so much to do"
in Obama's case...."so little time..so much damage done "
In Alan Paton's book..Cry, the Beloved Country" he wrote about the whites of South Africa..."when they have finally turned to love..will the black man have then turned to hatred"...
In America of 2009...when the electorate finally learns of the magnitude of the mistake they have made ....will we have an economy and a republic to restore??
I am worried.....there is no place to run....I am a Yank but grew up in RHodesia and South Africa ...much of our life was dominated by the experiences of Europeans settlers who left country after country apres UHURU and made their way south to Rhodesia..to South West Africa and finally South Africa.......when you are at the Cape of Good Hope...the track ends abruptly......western civ...the free market..civil society...the ideals of the Magna Carta to the US Constitution are being tested right now....we truly are at the Last Chance Saloon "
We have work to do !!
Paarl of RHodesia
Supply And Demand
May 9, 2009 - 11:21 ET by JDWOPEC ain't producing.
JDW
DAILY WAVE
When people fear their government there is tyranny.
When government fears the people there is liberty.
How to get noticed
May 9, 2009 - 12:25 ET by Kingfish17The key to getting noticed and invited back to these shows is to make outlandish predictions. If you are lucky and get one right, then that's gravy, but it's not imperative.
If you are making the......"Yes, I think oil could trade in a range of 40-80 dollars over the next three years"........prediction then the producer's eyes start to glaze over and you don't get invited back.
Why do you think they had all the "bank nationalization" looney professors on for the last 4 months? They scared the crap out of people and got them to watch.
and when Oil prices escalate
May 9, 2009 - 13:46 ET by dark_dsand when Oil prices escalate Obama will then vilify the Oil Companies and push to have them nationalized ....every crisis will be created or used to push his socialist agenda.
_______ Him and the Unicorn he rode in on
dark,
May 9, 2009 - 16:23 ET by R D HelmExactly right.
The Obamanistas have done nothing to address the supply issue. If anything, they have worked to make it worse.
My guess is the price at the pump will hit $5/gal later this summer, perhaps even higher.
For the Obamanistas this will be a double bonus-an opening to snatch the oil companies that still are American owned (and may only be Exxon-Mobile at this point) as well as the economy taking another hit (get ready for Porkulus II) just like it did when gas was just over $4/gal last summer.
Its a win-win for Obama in the eyes of the sheeple.
-Dave
The statists aren't coming, they are already here.
Now
May 9, 2009 - 14:04 ET by ahusserIf somehow the talking heads could get swine flu into the price of oil discussion we would have a perfect storm...of hype and BS.
"Somehow, I told you so, just doesn't quite say it." Will Smith in 'I, Robot.'
$300 oil? MSM will blame Obama WH, correct?
May 9, 2009 - 14:09 ET by Gary Hall.. and the left will be calling for congressional hearings..
Didn't Obama inherit falling oil prices - and for 100 days, it's been rising?
Obama and the Dems
May 9, 2009 - 14:17 ET by ahusserturning the dollar into a 3rd world currency will affect what we pay for oil. Does anyone remember Italian Lire?
"Somehow, I told you so, just doesn't quite say it." Will Smith in 'I, Robot.'
Do I hear $300??
May 9, 2009 - 14:45 ET by gopcongress"Do I hear $300? 300, by CNBC. Do I hear 350? C'mon, 350? Price of oil? C'mon, shut Rush up, do I hear 350? 350 from CNN... $400? Anyone? Shut down capitalism as we know it...do I hear 400? 400 to MSNBC... Do I hear $500? 500? 400 going once, 400 going twice, SOLD to MSNBC for 400 bucks!!"
_____________________
Moderate... Democrat... Liberal... Progressive... Socialist... Communist—The progression is clear as day.
meh
May 9, 2009 - 14:56 ET by katainkentHere we go again! If they can push up the price of oil then food and services will soon follow. Tossing out figures like this seems extremely irresponsible. I almost wish it was illegal. I don't honestly think that the projected drilling for oil on the long term was the reason oil prices dropped. I think it was because the demand could not support the price. People simply stopped driving. My husband was carpooling and I was limiting my runs to town to once a week. The roads became less clogged for commuters
Now that gas prices have dropped we've become lax. The mess of traffic (people heading into the city) I just waded through this morning says its not just us.
If it starts to cost $100+ dollars to fill my gas tank we'll definitely be clamping down again.
Hold on ‘cause the world will turn if you're ready or not ~ KT Tunstall
The ecomonic down turn, has opps HAD one good factor, low fuel
May 9, 2009 - 16:09 ET by upcountrywaterprices.. well that's going away, Gold at 916.20...misery index...
Americans Want It Both Ways.
The glamorous ends get the attention, never the mundane means of how to obtain them.
By Victor Davis Hanson
Today’s
Americans inherited the wealthiest nation in history — but only because
earlier generations learned how to feed, fuel, finance, and defend
themselves in ways unrivaled elsewhere.
Lately we have forgotten that and instead seem to expect others to do for us what we used to do ourselves.
Take our plentiful, cheap, and safe food supply. Long ago, Americans
struggled to create farmland out of swamps, forests, and deserts, and
built dams and canals for irrigation to make possible the world’s most
diverse and inexpensive agriculture.
Great read, the video below is still valid...
Reagan VS 0bama
outstanding article
May 9, 2009 - 16:35 ET by katainkentmy husband and I were just discussing this in regards to California. Here is this state that used to be this major producer of agriculture. We used to drive through NoCal every summer when I was a teen. Past miles and miles of orchards and nut trees - and they have now successfully regulated themselves into failing and abandoned farmland and pulled a string of NIMBY (not in my backyards) a mile long.
this is sums it up well :
I emailed it to a couple people. Thanks again. (edited for spelling :P)
Hold on ‘cause the world will turn if you're ready or not ~ KT Tunstall
This is also exactly what
May 9, 2009 - 16:07 ET by bigtimerThis is also exactly what the leftists want.
We'll be forced to be tracked too in our vehicles...with our mileage etc...this will be happening in my opinion.
Read this regarding Soros and his latest investments....where is the leftists in the msm screaming about this...oh wait, I know, Soros owns them too...after-all he is a Puppet-Master of the Empty-suit.
Hat-tip to sw for the Soros link.
We are in a real mess in the long run of it all when it comes to oil...just where they want us.
Doubling down on stupid is not a particularly good idea. ~Andrew Breitbart
Inflation!
May 9, 2009 - 16:34 ET by theworldisnotenoughThe linked article is good but you just can't beat the macro economics. A largely undeveloped Asia has alot of growing to do and they are going to do it with oil. The long term look for oil prices is much, much higher. Throw in a greatly depreciated dollar and $4.67 a gallon will be a fond memory. I'm not complaining I'm buying commodities indexes.
last year's gas price spike was entirely speculation driven
May 9, 2009 - 20:35 ET by puredmashiei've gotten used to the usual price increase when memorial day weekend arrives, so much so that i make sure i buy gas on wednesday that week. but last year was over the top. the idiot speculating traders invaded the commodity markets (oil) after the housing industry was ruined. now the auto industry is devastated. 15 million vehicles sold used to be the benchmark of a good year. last year it was less than 10. this year's projections are for less than 8.
another gas price spike like last summer, or one that tops it will bankrupt all of the detroit three.
swing hard in case you hit it.
You mean the cat is out of
May 10, 2009 - 01:58 ET by RR GOPYou mean the cat is out of the bag concerning our printing of money far beyond our actual worth and that's leading to inflation?
Say it isn't so!
One of the 34% who thinks George W. Bush was a great President. One of the 61% who wants to bring back the stock and pillory (yep...approval for Congress now at 39%...do you believe that!?).
That cat's been free for awhile
May 10, 2009 - 02:17 ET by RESTLESS 1But matters are pressing now.
"This
liberal would be all about socialize -- uh, uh, would be about
basically taking over and the government running all of your companies."-Maxine Waters 2008