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117 comments on You might have heard that CLX07 hit $86/bbl today. Oil--in the next month--will...

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marcosdumay on October 16, 2007 - 6:47am Permalink | Subthread | Parent | Comments top

Mostly, yes. Oil is an input to near everything and, so, inflation tends to go toghether with its price.
today
As I see, two factors can change real oil prices:
1 - A recession, where people stop buying lots of goods and concentrate their spending on oil. That would make oil prices go up.
2 - Food inflation, where people stop buying other goods to concentrate their spending on food. That would make oil prices to go down.

And 2 seems to be dominating 1 by now.

But forget about all that. Current oil prices are due to the weak Dollar (and a weak Dollar is partialy due to peak oil, but that is another topic). Have I said that gasoline prices are falling as a rock at Brazil?

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luisdias on October 16, 2007 - 6:54am Permalink | Subthread | Parent | Comments top

I'm sorry, I couldn't disagree more.

1. IF there's a recession, that'll mean less, not more oil demand, thus leading to lower prices.

2. Food inflation does not impact oil inflation unless there is a recession, in which case, oil goes down.

The dollar has stabilized at 1,42 in euros since last month, when oil hit 82. The current 5$ rise is therefore not because of the descending dollar. And oil is also rising in euros, so this is no "excuse" at all.

The underlying fundamental is shrinking supply (non-OPEC), shrinking stocks (USA) and growing demand (Chindia). Demand has been higher than supply all year long.

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Dragonfly41 on October 16, 2007 - 8:33am Permalink | Subthread | Parent | Comments top

"1. IF there's a recession, that'll mean less, not more oil demand, thus leading to lower prices."

Ah, but you discount the effect of panic and hoarding (personal and national) on prices.

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PartyGuy on October 16, 2007 - 12:22pm Permalink | Subthread | Parent | Comments top

People don't 'hoard' during recessions. They bemoan their woes to congress and the Democrats give them $5000 baby bonds.

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marcosdumay on October 16, 2007 - 8:51am Permalink | Subthread | Parent | Comments top

I am talking about inflation adjusted prices.

On a recession, every price go down (deflation), but oil moves less than average. On a food inflation, every price go up, but oil, again, moves less than average.

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117 comments on You might have heard that CLX07 hit $86/bbl today. Oil--in the next month--will...

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