Over a barrel

Here’s a little exercise in perspective.  Consider the following article about “record oil prices“:

Crude oil rose to a record above $135 a barrel as OPEC ministers said they could do nothing to stop the rally that has more than doubled prices over the past year.

Oil has risen 18 percent this month as banks increased price forecasts because of limited supply and demand growth. OPEC has “no magic solution” to high prices, Qatar’s oil minister said. The IEA, energy adviser to 27 nations, said it plans to reduce its long-term projection for oil supply.

“OPEC is impotent” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “The only member with the power to do anything is Saudi Arabia and they are laughing all the way to the bank. They have no incentive to spoil the party as long there is no major demand destruction.”

This is presented as if the entire reason the prices are going up is pure demand increase.  It is a factor, yet clearly not the only one.  Mentioning that, since oil is priced in dollars, the price inherently must go up over time as the purchasing power of a dollar goes down is quite rare, to the point where it’s almost seen as a “gaffe” when anyone in the media remotely suggests it.

I asked myself after seeing some articles like this “how much oil is actually IN a barrel?”, and looked it up.  The “barrel” referred to in oil pricing is apparently 42 gallons, based on a standard established over a century ago.  Take 42 & divide it by the latest “record high” of 135, and you have 31/100ths.  Now, imagine the first line of that article rewritten:

US dollars dropped to a record below 1/3rd of a gallon as the Federal Reserve said they could do nothing to stop the bleeding…

One problem with that: unlike in the original, the Fed caused the bleeding themselves.

It’s funny how we interpret the actions of other countries so differently from if we were in the same situation.  Imagine if the US were a Saudi level oil exporter, & Saudi Arabia were a US level oil consumer.  You think we’d be portrayed as “laughing all the way to the bank” as people suffer in the US media?

Feel free to draw your own conclusions…

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About b-psycho

Left-libertarian blogger & occasional musician.
This entry was posted in economics. Bookmark the permalink.

One Response to Over a barrel

  1. Andy P says:

    I assume you’ve seen this, but I thought I’d send it your way anyway. Gold and Oil track quite nicely.

    I’m no goldbug, but given this, I’m guessing you could track the retail price of almost anything right now and call someone out for price-gouging.

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