Oil price rocket
The crude oil price has doubled in just over a year
After posting the last item on peak oil, I decided to look into the energy price picture a little deeper. A few days ago in the Bangor Daily News I saw a graphic very much like the one shown above. Plotted is the closing value of a NYMEX spot contract for a barrel of crude oil each day from October 1, 2003 to October 22, 2003. The last close, yesterday, set another all-time record beyond $55 per barrel. The price is more than double what it was just after the Iraq invasion in April 2003.
Striking, isn't it? Bush invades an oil country, followed by horrendous, arrogant mismanagement so bad that the oil markets double! I guess it was predictable given Mr. Bush's history of running oil ventures into the ground.
Some news stories on the subject are now careful to point out that when oil averaged $35 in 1981, the equivalent value today adjusted for inflation was about $75 per barrel. (There were brief periods early in 1979 around the Iranian revolution when the inflation-adjusted price was near $100 per barrel in today's dollars.)
Below is a graph showing both the nominal and inflation-adjusted (current dollars) crude oil prices.
Source for oil price data is the Energy Information Administration; source for price index data is the Bureau of Labor Statistics
Through 2003, the data points are whole-year averages. The rightmost point is the current price, $55, the Friday NYMEX closing value. If the levels remains anywhere near the current nominal price, we will bust through the all-time yearly record average price in 2005. Is the all-time inflation-adjusted mark in jeopardy next year as well? Only time will tell.
In a Friday Bloomberg story, a trader is quoted,
"Momentum is the best word to describe this market," said Marshall Steeves, an energy analyst with Refco Group Inc. in New York. "We're still on a trajectory for $60 oil".It looks to me that this trajectory is comparable to the 1979-81 rise, with no end until high price dampens demand enough that stocks begin to build again. As was discussed in the previous post, additional supply is tenuous at best, with depletion just about eating up new supply. There is little room for error. The market reflects this when it moves sharply in response to any bit of negative news anywhere in the oil-producing world. This is an early mark of peak oil. Volatility -- including some sharp downward price swings -- will continue to exist, but oil consumers should prepare for upward price momentum to be a long-term feature of the energy markets.
Kerry's angle against Bush on high oil prices
Presidential candidate John Kerry has issued a statement pointing out that President Bush is doing his best to ignore this whole new realm of economic pain the American people are now beginning to suffer with respect to oil prices. Kerry spokesman Phil Singer said Friday:
George Bush must think that if he ignores the fact that energy prices are setting new records, they will go away. Americans are now paying top dollar for heating oil while the President does nothing as his friends in the big oil companies rake in the cash. We need a White House that puts the needs of everyday Americans first. It's time for a fresh start....My supposition from early August that if oil prices did not "ease into the fall ahead of the election...then it's really clear that the oil markets are beyond any significant influence of President Bush and his friend Saudi ambassador Prince Bandar bin Sultan" seems to be true. The question is, does it matter if oil is rocketing? Will people blame Bush and will Kerry be able to gain any ground on the issue?
Low Heating Oil Supplies Threaten an Expensive Winter. Heating oil supplies are at low levels, threatening to make this winter an expensive one for millions of families. "U.S. supplies of heating oil fell last week to stand 12 percent below this time in 2003, a gap that traders fear refiners will not be able to close if the heavy consuming Northeast is hit with an early or severe winter." (Reuters, 10/22/04)
