I note that the US economy continues to show modest signs of recovery, with rumors of a very good Xmas in stores, and acceleration in consumer spending in the last few months' data. That must mean it's time to start thinking about the next oil price shock, right? We know that it's become hard to raise supply easily, so any substantial surge in demand will tend to cause an imbalance, and since oil demand is very inelastic, that can easily lead to big price surges.
The graph above shows US retail gas prices (blue, left scale) and WTI spot oil prices (red, right scale). I note two things:
- In the boom price years of 2004-2008, gas prices developed a pattern of spiking up in the summer, and falling back around year's end. Oil prices too, but slightly less so.
- Current gas prices (level of blue dotted line) are higher than at any year's end except for the beginning of 2008, which we have now pretty much equalled. We know what happened to prices that summer.
Still...
... But it's on Krugman's and Hamilton's lists of things to watch. CR should have dropped number 9 and inserted energy prices in its place. The Fed has ably steered clear of deflation and inflation so far. We have more to be concerned about China's bubble popping than spill-over from their inflation problems.
ReplyDeleteGas prices have sprouted up in three casual conversations I've had in the past few weeks, and I was careful not to bring up the topic. It doesn't hurt that prices here jumped ten cents the day after Christmas and the media are already blowing that horn.
And the sooner the better! The quicker and more clearly people get the price signals to change, the faster they'll change. Maybe this will be the year the Volt takes off and yuppie trucks go the way of the dodo. And maybe this will be the year we can stop arguing about modern rail in the midwest. [And maybe I'll get a pony for Christmas!]
I got stuck in the snow in south Brooklyn a few days ago, and lemme tell you, there were no shortage of SUVs just out joyriding around and people cursing the smaller cars that got stuck and blocked the snow plows. I even saw a few comments on a local blog to the effect of, "if you live in the Northeast and DON'T have an SUV, you're a moron who deserves to get stuck in snowdrifts."
ReplyDeleteNever mind that, as Jeff Masters points out in his blog at wunderground.com, the recent uptick in huge snowfalls in the northeast is most probably due to global warming.
So the SUV guys basically helped create the conditions for their obscene vehicles to be "necessary".
We've got some major mental adjustments to make in this country before we start acting anywhere close to rationally.
Oil prices will crash in 2011 to somewhere between 10-30 dollars per barrel...
ReplyDeletewe are still in debt-deflation phase... check Steve Keen et al.
Alex