If crude inventories are the highest since 1989, why is the price of a barrel still $90? Demand always goes down during a recession. All of the energy independence gurus assure me that Bakkan Shale is going to make us a net exporter. The price of a barrel of oil in 1989 was $19. Today it is still over $90. According to our friends at the BLS, the CPI has risen by 88% since 1989. If everything was equal, the price should be $36 per barrel. It must be those evil speculators.
OR MAYBE, JUST MAYBE, the BLS, Federal Reserve and politicians have been lying about the true inflation rate. Do you really believe that inflation has averaged below 3% per year over the last 24 years? If inflation has really been averaging above 5% over the last 24 years, that would explain the current price. The fact that worldwide production has barely budged in the last 8 years might also explain the high price.
But don’t you worry. Energy independence is just around the corner.
Crude Inventories Surge To Record High As Energy Demand Collapses
Submitted by Tyler Durden on 05/01/2013 11:38 -0400
A month ago we highlighted the somewhat stunning reality of the real economy via the EIA’s detailed energy supply and demand data. The key takeaway was that we hoped this did not represent the true state of the economy since the data was so dismal. Fast forward to today and the DOE just released a much higher than expected build in crude inventories that took the stuffed-channel of oil products to all-time highs. The 395.3 million barrels is higher than the previous record in July 1990. There appears to be a number of factors at play – none of which are positive. There is a surge in supply due to the incessant harvesting of shale oil (which could have its own problems as we noted here). Second, we suspect there is a degree of ‘channel-stuffing’ occurring – if we pump it, they will buy – as producers and transporters are desperate to keep active and show incremental business (despite fading railcar loadings). But perhaps most important, as EIA data has shown, there has been a collapse in end demand for crude products not seen since the 1990s. Today’s surge in inventories appears to confirm demand remains subdued at best.