Sign "O" the Times


Jonathon Trugman has today’s ominous observation:

Crude prices are down 10 percent since mid-June, when global tensions mushroomed.

Yes, oil continues to fall right smack in the middle of summer driving season.
It falls despite the US posting a respectable second-quarter GDP number.

It falls while Israel and Hamas are in an all-out war and the rest of the Middle East is burning and being taken over by violent Islamist extremists.

Well, here is one fact that we do know: During recessions and weak growth, energy prices do fall.

Look no further than during our own financial crisis; crude got down into the high $30s a barrel at the end of 2008.

Perhaps nobody is buying the first look at second-quarter GDP at 4 percent and are awaiting further downward revisions.


Partly the decrease is the result of Saudi Arabia increasing their oil output. As the low-cost producer of crude, they can keep the taps open at prices that would put many other producers out of business. So maybe the Saudis are trying to keep oil prices low enough to keep the global economy floating; maybe they’re trying to kill fracking in the womb. Maybe both. Although there’s an argument to be made that it’s impossible to keep the global economy afloat without fracking, because fracking production and jobs are keeping the American economy afloat, and without the American economy, there really isn’t a global economy. But that’s an aside.

The broader point is that for any product, demand only has to outstrip supply by a little, to cause prices to rise by a lot — frantic buyers get frantic, yo. Furthermore, oil prices almost always move in lockstep with international friction, and for the same reason. When tensions flair, buyers want to get their hands on the sweet crude now, before somebody nukes the Straits of Hormuz or before Russia gets sanctioned, or what have you. It’s even worse with a Progressive Democrat in the White House, because there’s no telling what domestic or offshore oil production he’ll shut down in a fit of smart diplomacy.


So, yeah, the US is in what is supposed to be peak summer demand while coming off a hot Q2 GDP increase, while Russia continues its crapstorm in Ukraine, Israel is at war again, and all the rest.

And oil prices are down 10%, as you can see for yourself.

Something doesn’t add up — but who are you gonna trust, the Federal government’s statistics or your own lyin’ eyes?


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