Crude Oil = $92 $91

Tuesday, September 16, 2008 | 07:01 AM

The kneejerk reaction to lowered crude is that its a positive for consumers. Under normal circumstances, that is true. But int he current environment, well, not so much.

The drop from $147 to $110 or so was demand destruction, as Americans drove less miles, stayed closer to home, consumed less. It is a classic case of high prices being the cure for high prices.

But the recent acceleration of the price drop in commodities is a reaction to a variety of macro factors.  Ike being less bad than expected is certainly part of it, but there's a lot more to it than that. The collapse of Lehman Brothers, the BA/Merrill merger, and AIG's crisis are all huge credit negatives.

They imply further economic dislocation due to a tightening credit availability, and other related problems. In my mind, that's why Oil is selling off -- expectations of further credit dislocation and economic contraction.

Your mileage may vary . . .

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Crude Oil Almost Down to $92
click for updated chart
Oil_92

Tuesday, September 16, 2008 | 07:01 AM | Permalink | Comments (51) | TrackBack (0)
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Comments

Still looks like just another popping market bubble to me. The fundamentals never really supported a price over $80 or so, if that.

Posted by: Jacques | Sep 16, 2008 7:07:49 AM

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