With supply following demand, as with any monopolistic arena, it looks like the world crude oil balance remains very much neutral leaving the Saudis in full control as swing producer where they set prices and let quantity adjust to market demand.

Stable crude prices with 0 interest rates, high excess capacity and low aggregate demand should keep inflation at bay indefinitely, with productivity increases making deflation the greater risk.

UE Rate->FF Rate”>

7 Responses

    1. Thanks for pointing to that article, Curious. I hadn’t read it but I was aware that just about every oil storage facility is now being used by speculators, to the degree that there aren’t any empty tankers available. The price of petroleum doesn’t seem to be reflecting present demand, so it seems that a lot of petroleum is being hoarded in expectation of future growth that will increase demand. Is this a distortion in price behavior due to speculation, or just rational expectations at work?

  1. The saudis are necessarily price setter, and speculators give them ‘cover’ to change price. the saudis try to disguise their price setting.

    specs also influence the calendar spreads which represent ‘inventory conditions’

    michael posted that on his own before i could comment in context so he took it down.

  2. the high unemployment is the evidence we are grossly over taxed

    unfortunately no one in the admin understands that fact

    1. Warren, about to skip town for a business trip but I remembered something I was going to send you about oil conservation, an International Energy Agency report called “Saving Oil In a Hurry”. It discuses how much oil conservation can be achieved via different policies if adopted by North America, Europe and Asia. Bottom line, x-nay on the 30mph speed limit.

      If your goal (IIRC) is to reduce oil usage by 10%, a 55mph speed limit gets you 4.5 points, encouraging increased tire pressure gets you another point. You get over the 10% hump with either 1. mandating telecommuting and/or 4 day work weeks or 2. dramatically expanding carpool infrastructure. I’ve attached links to the summary graph and to the report itself. A 55 mph speed limit would be met with some resistance but people can accept the familiar. A 30mph is a little too outside the box, its actually 5mph lower than the wartime speed limit set by Franklin Roosevelt (and that was when civilian gas rations were 3 or 4 gallons a week and before there were any interstate highways).

      Finally, building out rail infrastructure would save a ton of fuel, roughly the same as all the IEA proposals combined. Not so much transit rail (well less than 1% savings per IEA report) but the expanded use of freight trains to replace trucks for long-haul shipping.

      In a study recently presented to the National Academy of Engineering, the Millennium Institute, a nonprofit known for its expertise in energy and environmental modeling, calculated the likely benefits of an expenditure of $250 billion to $500 billion on improved rail infrastructure. It found that such an investment would get 83 percent of all long-haul trucks off the nation’s highways by 2030, while also delivering ample capacity for high-speed passenger rail. If high-traffic rail lines were also electrified and powered in part by renewable energy sources, that investment would reduce the nation’s carbon emission by 39 percent and oil consumption by 15 percent. By moderating the growing cost of logistics, it would also leave the nation’s economy 10 percent larger by 2030 than it would otherwise be.

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