Tuesday, June 24, 2008

ICE is not nice

Blog Simple is many simple things, but an economics blog it ain't. Thus, we find ourselves somewhat in a quandary when economists that seem to have some relation to the facts (thus excluding the libertarian types) disagree, especially on a subject like oil prices. Krugman has been fairly adamant that oil prices cannot be rigged by speculators, though lately he shows signs of rethinking his position.

Ed Wallace, who is not an economist, but rather a business journalist, has a very interesting article about oil prices and more:

ICE, ICE, Baby (Part 1)
ICE, ICE, Baby (Part 2)

Read the whole thing, there a lot of things that are not commonly talked about, such as:
This from page 1 of the Executive Summary of that Senate investigation, there is this one troubling line: "Today, U.S. oil inventories are at an eight-year high, and OECD (Organization for Economic Co-operation and Development) oil inventories are at a 20-year high."
and this:

That’s right, shipments of oil headed west have shown serious declines during the month of April, down 800,000 barrels per day in the week before the publication of the report. Now, let me give you the first line from under the Westbound Oil shipments chart: "In the west, a big share of any [oil] stock building done this year has happened offshore, out of sight."

Could this be true? Oil Movements, the unimpeachable source for finding the real world situation on oil transits, is saying that oil is being hidden offshore, not declared in inventories? Yes, that is exactly what they are saying.

That same week our refineries cut their production runs back to 85 percent, down from 89 percent a year ago, to trim more gasoline out of our stock reserves, to increase their profits per gallon.

When looked at from the perspective of the last seven years, the kleptocrats that run the country seem to be trying to ensure one last, and biggest, score. They're making money from the current situation hand over foot now, and when the time is ripe, and the suckers have all been drawn in, the bubble will burst. The saber-rattling against Iran could certainly be part of this game.

The smoke that is currently making Northern California seem like something out of the last days of Pompeii might be what is accentuating the gloom and doom feeling around here, but I fear it is going to be a long, hot summer.


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