Oil Headed To $100 Per Bbl?
This is the headline. $100 + per barrel. No joke. Again, $100 + per barrel. Anyone remeber the summer of ’08? A friend of mine out of state who happens to run his own trucking company called me just about the time diesel broke the unthinkable $5 per gallon mark. I can’t write exactly what he said. There was lots of cussing. And some crying. But mainly just lots of cussing. You can imagine just how tough it’s got to be for a guy who makes his living towing a 50 ft. trailer around the midwest when he realizes that he’s about to spend as much to fill his tanks as his first car cost.
Look, I’m a capitalist. I’m a free market kind of a guy. Government: pave the roads, deliver the mail, guard the borders (are they even doing ANY of those these days?) but otherwise, Uncle Sugar, get outta my way! Free market principles are NOT at work here. They can’t be. Supply and demand 101. High supply, low demand, low price. High supply, high demand, upward pressure on price. High demand, low supply, hang on to your wallet, it’s gonna be a wild ride up, and so on. Get it? Of course YOU do. But what is wrong with the market insiders? Oh, of course, I forgot! We’ve got that little billionaire boys club cartel known as OPEC to please.
Since oil is traded in US dollars, it’s to the advantage of speculators and OPEC for the dollar to be low. The lower the value of the dollar, the more black gold they can buy on the futures market. The problem as I see it is that supply/demand fundamentals have been sucked out of the whole equation. People are driving less. Industry has slowed down. Yes, the sub-prime mortgage/banking crisis of 2008 had much to do with this. But gas at $5 per gallon helps no one. Oil could be $300 per barrel. But, if we can’t afford it, that erodes a lions share of the market. No market = no value. Sorry, OPEC. $100 + per barrel is not realistically sustainable. And I am NOT driving a Prius. I’ll be tying up a horse outside the office before that happens.