Illustrating the impact that higher fuel prices can have on consumption, the International Energy Agency reported that motor fuel consumption had dropped as much as 20% in Britain. The fall in usage is greater than in other countries, in part due to larger hikes (20% versus 14% on the Continent) and the prevalence of mass […]
Read more...Forgive me if you’ve heard this one before, but a classic Wall Street joke illustrates an important concept. On a slow day in the markets, trader A decided to open bidding on a can of sardines. He offered it at $1. It was snapped up by B at $2, who sold it to C at […]
Read more...Oil has eased over $2so far today from Friday’s stunning $139 level. As told in Bloomberg, some see it as a reaction to the Saudi argument (consistent with the comments of oil industry executives) that current prices are not warranted by supply and demand, while others see it as a simple pullback: “The increase in […]
Read more...Bloomberg reports (hat tip Calculated Risk) that the US, Japan, China, India, and South Korea agreed on the need to cut energy subsidies and take other measures: The U.S. and the four Asian nations, together accounting for half the world’s energy consumption, said today wider use of alternative fuels such as clean coal, nuclear power, […]
Read more...This chart, courtesy Menzie Chinn at Econbrowser, says a lot: SDR is Special Drawing Rights,. Note the dollar is 44% of an SDR.
Read more...We have discussed the role of fuel subsidies in distorting demand for oil and therefore adding to price pressures. We’ve also noted that as oil prices have spiked, the cost of these subsidies in some countries is becoming untenable. Both Indonesia and Malaysia have raised end user gas prices. One of the largest countries giving […]
Read more...The New York Times describes how some big-money players are skipping the commodities market and going directly to being hard asset players by buying farmland and grain elevators. This is hardly new (I know of one global macro fund that was making ag related investments two years ago) but the Times piece gives the impression […]
Read more...David Lukken, the acting chief of the CFTC, said today that while his agency is set up to detect market manipulation, it is less well equipped to gauge the impact of a flood of new speculative money into the commodities markets. However, he said the agency intends to get to the bottom of the question. […]
Read more...A reader forwarded me a Morgan Stanley fixed income research report wrap, which included a discussion of the role of gasoline and oil price subsidies in certain developing countries. The price gives an good overview of the role these defacto consumer price discounts have played, and argues that they will have to be cut back […]
Read more...A quick recap of Soros’s prepared remarks at the Senate hearings on energy market manipulation, which I watched just now. The billionaire said that he had a view of bubbles that departed from conventional wisdom about financial markets. They start with a trend but the dymamic becomes self reinforcing and increasingly disconnected from reality. For […]
Read more...Gideon Rachman in “We cannot go on eating like this” in the Financial Times, points out the increasing heated discussion between advanced and emerging economies over resource issues, particularly food. The positions of the two camps are fairly easy to set forth: the West says, “You can’t have what we have, it’ll ruin the planet,” […]
Read more...Bloomberg reports that the Commodity Futures Trading Commission, which has opened an investigation into whether market manipulation may be influencing oil prices, is taking a hard look at physical delivery and storage. A particular focus is the role of Cushing in the trading of West Texas Intermediate Crude, one of the two most important contracts […]
Read more...It’s a bit premature to say that the price correction in oil and commodities generally is a harbinger of a reversion of much of the runup of this year; they were so overbought that some profit-taking was inevitable. But now that the bulls have finally met some strong headwinds, cautionary views are suddenly getting more […]
Read more...The dollar rose today, and gold has fallen below $900 as f this writing due to revisions in the first quarter GDP release that increased growth from “anemic” to “slightly less anemic”. Note that there was considerable skepticism about the initial 0.6% GDP growth figure (the revised level is 0.9%) because the total was entirely […]
Read more...It’s remarkable how certain words elicit knee-jerk reactions. Take “speculation”. I’ve questioned the prevailing view that an price increase of nearly 50% in six months in crude oil prices is entirely a function of demand (meaning immediate consumption, the kind most economists think of when they draw demand curves) and supply. That is partly because […]
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