The Great Depression Online




Great Depression Online Archive Issue:

Occurrence On A Wednesday In May

Great Depression Online
Long Beach, CA
May 23, 2008

Inside This Issue You Will Discover…

*** Telling Congress What They Want To Hear
*** Blathering Analysts
*** Heehaw!
*** And More

Telling Congress What They Want To Hear

John Hofmeister, president of Shell Oil Co., stood before congress on Wednesday, May 21st, and told them exactly what they wanted to hear.

“The price of oil should be ‘somewhere between $35 and $65 a barrel,’” Hofmeister said, as reported by Mark Shenk for Bloomberg.

How Hofmeister knew what the price of oil should be is a mystery to us…maybe a leprechaun whispered it in his ear.  But the market knew he was just blowing gas in Congress…  For on the same day, as if to mock the procession, “Crude oil rose to a record above $134 a barrel in New York.”

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Blathering Analysts

The analysts surveyed by Bloomberg News had somehow deduced that oil inventories would increase by 300,000 barrels.  But when the numbers were crunched, there was a big surprise…inventories hadn’t gone up, they’d gone down.

“Inventories fell 5.32 million barrels to 320.4 million last week, the biggest drop in four months, the Energy Department said yesterday.”

That was about the time another analyst opened his mouth to educate us on what was going on…

“‘What we have here is a situation where essentially higher prices aren't generating any more supply,’ Paul Sankey, an analyst at Deutsche Bank Securities in New York, said in an interview with Bloomberg radio.  ‘What we have to do is keep pricing the commodity higher until demand starts falling,’ which ‘is around $150 a barrel.’”

Yet $150 per barrel may not be enough…

“Goldman analyst Arjun N. Murti said in a May 16 report that ‘the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.’”

Heehaw!

We remarked in the May 9, 2008 GDO that, “When endless cheap money fully expresses its claim on finite natural resources, the ultimate price run up should be indescribable.  Add a geopolitical supply disruption, or a hurricane in the gulf, and we’re in for an atomic price explosion.”

Now, just two weeks later, oil has spiked another 12.5-percent as the higher price expectations have transformed into a bubble psychology.  We found a mania confirmation in the level headed and thoughtful analysis reported in a yahoo news story by Chikafumi Hodo…

“‘You simply have to follow the trend and buy now,’ said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo.

“‘You really cannot forecast how much further the market will rally now.  All I can say is the market will continue to rise,’ Kageyama said.”

Heehaw!  This is fun.

Sincerely,

M.N. Gordon
Great Depression Online

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