Article

2009-05-19 Economy

Surge in oil prices leads other commodity prices upwards

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Posted by lotp 2009-05-19 00:00|| || Front Page|| [1 views ] Top

#1 This is the start of inflation. It is going to be hard to stop. In order to stop it, the Fed will need to raise interest rates. When that happens, more mortgage defaults. Rinse, lather, repeat.

Posted by crosspatch 2009-05-19 03:56|| 2009-05-19 03:56|| Front Page Top

#2 And US oil production went below 5M barrels/day last year, the first time since 1946. The red-green-government alliance is slowly but surely killing this country.

Here's a glimpse of the family car of the near future. Those lucky enough to have a car at all.

Posted by ed 2009-05-19 08:01|| 2009-05-19 08:01|| Front Page Top

#3 The Obama Lazy-Boy

Posted by Besoeker 2009-05-19 08:11|| 2009-05-19 08:11|| Front Page Top

#4 When that happens, more mortgage defaults. Rinse, lather, repeat.

Agreed, Spot, for those who still have variable rate mortgages. Anything that puts a little extra strain on homeowners is going to cause foreclosures until all those who are over-mortgaged move to housing their incomes can support. Unfortunately, the whole jobs thingy is putting those who were fine before into a precarious situation now.

Posted by trailing wife 2009-05-19 09:02|| 2009-05-19 09:02|| Front Page Top

#5 Curious that this oil price run-up (from ~$9 to ~$59/barrel) has not been accompanied by an increase in gold prices, which have been holding at $900-930 per ounce. This is not typical of inflation.

Posted by Glenmore 2009-05-19 09:48|| 2009-05-19 09:48|| Front Page Top

#6 from ~$9
No, from ~$49

Posted by Glenmore 2009-05-19 12:36|| 2009-05-19 12:36|| Front Page Top

#7 Glenmore, I hate to answer an implied question with another question, but: how much gold did you use yesterday, and how much oil?

Posted by Thing From Snowy Mountain 2009-05-19 12:51|| 2009-05-19 12:51|| Front Page Top

#8 The start of inflation was when the Treasury & Fed began printing money.

Posted by Nimble Spemble 2009-05-19 12:52|| 2009-05-19 12:52|| Front Page Top

#9 Snow Thing,
Typically inflation triggers movement of money - that stuff government defines - into 'real' things such as metals and lasting commodities. Gold and oil have tended to 'track' each other in price but right now they are not. We know government money printing deflates the value of the pre-existing money (inflation) which would be consistent with the increase in price of oil. My question is why has not gold also increased? There is something missing in my simple model and I don't know what. Perhaps the oil price increase is NOT due to inflation, but to decreased supply/renewed demand or speculation, and inflation is not actually starting yet. One other thing that does not seem to be happening with gold prices is a response to a flight from dollars to Euros or Yuan or whatever. Again, inconsistent with the general story line.

Posted by Glenmore 2009-05-19 13:10|| 2009-05-19 13:10|| Front Page Top

#10
NOTE: THIS IS AN ATTEMPT AT A REPOST, BECAUSE I SCREWED UP THE HTML ON A LINK AT THE LAST POST. IF A MODERATOR WOULD BE SO CONSIDERATE AS TO DELETE THE LAST POST I MADE BEFORE THIS ONE I WOULD BE THANKFUL. (Unfortunately, I'm broke, so there are limits to my thankfulness...)

Oil is probably a much more sensitive commodity to inflation than gold because it's used. Every day millions of barrels are put into the supply system, and every day millions of barrels are taken out of the supply system, turned into other products in refineries, and used, in volumes several orders of magnitude greater in price than gold.

If you think there are other factors at work, the factors I just outlined will make oil more responsive in price movements to various attempts at price manipulation than (for instance) gold is.

Some other possible answers: there was a bubble last year, and it burst and now that the last of the bubble positions have been liquidated, the price is rebounding.

Second, the oil industry, having more players than the gold mining industry, many of which are in state-run companies who a) have the access to money with which to perform market manipulation, and b) have the incentive to play the futures market in attempts to drive up the price of the commodity they sell, is in a situation where price swings are invvariably magnified.

(See some speculation on that problem here: KGB Commodity Corner at the blog Globalwarming-Arclein. I meant to point that out to you and others a while back, but I think that was in the week, not the period yesterday, when everyone was having problems connecting to the 'burg.)

Posted by Thing From Snowy Mountain 2009-05-19 13:36|| 2009-05-19 13:36|| Front Page Top

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