I feel a lot better about myself now. And these days feeling good about one’s self is all-important.
You see, I read, studied, researched, and seriously cogitated. And now I feel better. Not because I learned anything or in any way came to some problem-solving conclusion. No, I feel better because I now know that a whole bunch of folks a lot smarter than I am don’t have a clue either.
The price of oil (read that: jet fuel, avgas, and auto go juice) has doubled in the last year, gone up by about a third in the last few months. Big questions: Why? And who profits? Has the intrinsic value of the black gooey stuff jumped that much? Has the amount available suddenly dropped? Are we earthlings all at once screaming for more of it? No, no, and no.
It seems there is a slight over supply. Demand overall is fairly flat and in the US has declined a bit (even before the most recent price rocket ride). (Supply is up, demand is down.) So, with all due respect to Adam Smith, it should be apparent even to the ignorant masses (of which I am a proud member) that the law of supply and demand is not fully in control here.
So, what is going on?
Those in position to know… don’t.
The big oil company CEOs don’t know. Congress sure as shooting doesn’t know. All kinds of experts, pundits, talking heads, consultants, and pontificators extraordinaire don’t know.
So, I’m in good company, because I don’t know either.
It has been suggested that, while there are other contributing factors, it is mostly the fault of wild-eyed and crazy speculators. Michael Masters, portfolio manager of Masters Capital Management, has said the tons of speculative money pouring in “has nothing to do with the real world supply or demand for crude oil.”
Is this like the Dot-com bubble? Just a few years ago in utter amazement, I watched folks making huge fortunes buying into companies that had nothing more than a website and a promise. Many times I was tempted to jump in too. But there was no value there. It made no sense to buy something that was totally worthless just because some other fool might pay even more for it. It had to stop somewhere. And it did. Big time.
There is a difference between the Dot-com bubble and the oil bubble though. We common folk didn’t much care one way or another when crazy people paid wildly exorbitant prices for nothing.coms and lost their shirts when the bubble burst. And I really will not care WHEN the oil speculation house of cards goes up in a roaring blaze. No, for this bubble burst, I will likely dance a gleeful jig, because this time the bubble builders are costing me right in my own personal little wallet, whether I like it or not.
So, what do we do about it in the mean time? The long-term solutions may be somewhat complicated, but in the short term it’s pretty simple. Don’t buy the stuff. Or at least don’t buy as much of it. After all, it’s not like food. We don’t have to have it to live. It’s just gas, not oxygen. Drive a little less and, yeah, don’t fly your airplane as much (sob).
I would write more on this very important subject, but my wife wants me to go to the grocery store (8 miles one-way) for a quart of milk. If I am to get back before dark, I need to start now. It’s dangerous to walk these roads at night.