Wednesday, July 23, 2008
How We Know Oil is Going Down
After carefully reviewing the current status of supply and demand for crude oil, thoughtful minds might reasonably conclude that the price of crude oil has peaked.
For starters, airlines are going bankrupt left and right, and the level of route reductions the industry is taking in response to the crisis is even larger than what they did following 9/11.
So we know jet fuel demand is headed down.
Meanwhile, the American auto buyer, after years of coddling by an oil-friendly and global-warming-denying administration, not to mention a U.S. Congress full of fools trying to protect the Big Three auto makers from their own bad decision to base their business on making expensive trucks and SUVs instead of low-cost, fuel-efficient cars, has more or less thrown in the towel on trucks and SUVs.
So we know gasoline demand, at least in the U.S., is declining.
Overseas, governments in India, China, Thailand and Indonesia are reducing subsidies for many types of fuel—so demand in developing nations might just be leveling off.
All of which suggests that the old, immutable laws of supply and demand are still in effect, and the price of oil is headed lower.
But the reason we really know the price of oil is heading down has nothing to do with anything like a sober, reasoned analysis.
The reason we know oil is headed down is the comic page.
Specifically, a comic strip called “Wizard” that appeared yesterday in a local newspaper.
Now, we look at the comics page strictly for Dilbert. But when the phrase “140 bucks a barrel” appears in a cartoon, it catches the eye:
Guy: “The Huns are scaling the north wall.”
King: “Prepare the troops for hand-to-hand combat!”
Guy: “Shouldn’t we dump the boiling oil on them?”
King: “Not at 140 bucks a barrel.”
It may not be quite as good as Time Magazine’s peak-of-the-market cover story on “Why We Love Our Homes” back in the summer of 2005, which we highlighted here at the time as a sure sign the peak of the housing bubble was upon us.
But when Congress is moved to blame the spike in oil on “speculators” in order to cover up their own miserable failings, and a comic strip uses the price of crude oil as a punch line, you know we’re at the end of a cycle.
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Posted by Jeff Matthews at 8:21 AM