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View Diary: Welcome to the Wonderful World Of Commodity Inflation (175 comments)

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  •  heh (3+ / 0-)
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    3goldens, MarketTrustee, Downpuppy

    ER, no. The run-up in oil prices is due to an ever worsening global supply-demand equation, and the price is a reflection of the fundamentals currently in play in the global energy markets; dollar weakness isn't helping the situation any either - the price increase in Euros is considerably less.

    If the markets thought that there was any imminent prospect of an additional middle-east conflict that threatened to take anywhere from 2.5 to 14 million barrels of oil per day off world markets, the price would spike overnight.

    Compared to a year ago, US commercial inventories have declined by some 70 million barrels of oil ( about 6-7% YoY decline ), and there seems little prospect of an immediate reversal in the decline trajectory in inventory levels - especially as there are a number of refinery outages which are putting pressure on US products output, and there have been interruptions in US domestic crude output due to a weather-related GoMex shutdown last week and pipeline repairs in Alaska.

    If you think that the markets would barely respond to the commencement of military operations against Iran and that this possibility has already been priced-in, then you're delusional.

    •  Some Portion (0+ / 0-)

      of the price is certainly due to general global geo-political uncertainty. The oil price has to reflect attacks on Nigerian oil producers, threats of Venezuelan nationalization, and even political uncertainty regarding opening up ANWR in addition to basic supply and demand. But just estimating how much general geo-political uncertainty is affecting the price let alone how much is due to expectations of war with Iran would be a bear of an econometric problem.

      -- You are all individuals! -- I'm not! -- Shut up! Be quiet!

      by Skjellifetti on Tue Sep 25, 2007 at 10:48:37 AM PDT

      [ Parent ]

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