Tuesday, August 12, 2008

Oil Porn

Unfortunately it is articles like these from apparently intelligent sources that give the public a false sense of security. The long term trend for inflation and interest rates is up. An article on Denmark I posted recently put it very well: Oil prices ought to be taxed more than they are to break our addiction to the stuff. Instead, like junkies we celebrate when our access to unimpeded hits improves. It's stupid.

The long term trend for energy supply is down (even if we curb demand somewhat) meaning an average upward movement for oil prices. People should be changing their living and working arrangements, change their identities from consumers to conservers, but what are they doing? Breathing a sigh of relief, going: "Phew, at least that's over, " and going back to their lives and jobs.

The spike to $147 was a valuable message. Are we learning from it? Probably we will remain in a paradigm of wishful thinking beyond $150 which I maintain will be around Christmas, even though oil is $112 now. But does anyone remember, earlier this year oil was below $100?
clipped from www.telegraph.co.uk
Oil barrels
A return to relatively normal oil prices would take the sting out of inflation

If the trend continues into September at anything like the same rate of descent, most of the inflationary spike of the past 12 months will miraculously have been sliced away. This is a dramatic reversal, and it is worth trying to work out why it is happening and what it means.

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