Tuesday, May 17, 2011

Lower fuel prices? For how long?

Just two weeks ago, I wrote about the high price of oil and predicted that fuel was going to be pricey for as long as we would care to imagine. Here it is, fifteen days later, and oil has dropped from $114 per barrel to barely $96.

Does that mean that I was wrong? Yes... obviously. ;-)

But I don't think that I'm going to be wrong for long. While this latest speculator bubble was popped in part by a rising dollar (which makes it more expensive to short dollars and buy oil priced in dollars, a common way for financial wizards to manufacture money) and in part by higher margin standards (which made those wizards put up more cash to cover their bets), the idea that the world economy will do as badly as is suddenly forecast today is as silly as the idea that it was going to do as magnificently well as it was suddenly forecast a month ago.

Look, jet fuel is made from oil, and oil is controlled by governments that are almost universally oppressive. Long-term stability in oil-producing countries has never been likely and is even less so now that the so-called "Arab Spring" is occurring. Instability doesn't actually cause shortages these days, because we never get that far, but speculators do place bets on assumed future shortages and drive up the prices as if the oil is already running out. It's a game, and we're the losers.

Today is a good day. Oil is lower. Gasoline and jet fuel prices are dropping. Enjoy it while it lasts, because it never does.

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