The now-plunging U.S. dollar has certainly been an important factor in the recent rise in oil prices, but one of the other funnier explanations over the last few weeks has been the odd logic that stocks are rising, so the economy must be improving, so there will be higher demand for energy sometime down the road. On CNBC a short time ago, Jessica Hoverson of IMF Global talks about some other reasons for crude oil now approaching $83 a barrel.
What’s really funny here in 2010 is that, after a gain of almost 80 percent last year, the oil price is still anywhere near $80 a barrel given the now-incessant talk of deflation, a weak U.S. job market, slowing growth in China, and overflowing crude oil stockpiles.
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The way I see it is that it’s the incessant deflation talk that’s funny, considering that oil is still at $80 despite a weak job market etc etc etc.
That’s an interesting way to look at it… I wouldn’t say it’s correct, but it’s interesting…
I’m at least half joking, the reason being that market prices (so often wrong as they are) can never be used as “proof” of anything.
I am serious in my confusion at all the deflation hysteria out there, however… the private sector credit collapse already happened, after all. Next up (timing TBD) is the government debt crisis. Another round of deflation could happen between now and then, I suppose, but given the vast fundamental differences, the level of certainty that 2008 is going to happen all over again is pretty baffling to me.
BTW I am not referring to you with my “level of certainty” jab, but to the deflation hysteria crowd out there in the blogosphere.
A little deflation might not be a bad thing – I’m kind of getting tired of $80 oil and $3 gasoline…