Guess what is up almost 100% from its low in early 2009? That’s right – Gasoline. Isn’t that great? I wonder why the MSM isn’t proclaiming this tremendous news like the AWESOME 19% decline in New Home Sales – I mean 5.5% increase over October, which was revised down from what was reported last month.
My investment in a hybrid looks better by the day. Oil now over $91.
Reverse Engineer says:
I don’t suppose you noticed that ENORMOUS crash dead center of the Gray Box, or the point at which the Gray Box starts, which is is just around where we are NOW. Draw yourself a new Gray Box starting with this point on the graph.
Its a cyclical phenomenon Jim. The price will rise again until it meets the hard place where the economy cannot support the price, and then it crashes again.
This is called Volatility, not Inflation.
RE
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23rd December 2010 at 10:15 pm
DavosSherman says:
If these effing idiots at the Fed aren’t on crack or meth or some other drug – then they should be.
Big Sis is possibly the only form of life that is more inept.
http://abcnews.go.com/WN/pilot-hasseled-tsa-uncovering-security-breaches-major-airport/story?id=12470082
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23rd December 2010 at 10:56 pm
Administrator says:
NO INFLATION, NO INFLATION, NO INFLATION
12 Days of Christmas Gifts Cost 9.2% More This Year
By ELIZABETH OLSON
Published: December 22, 2010
Even those with a big year-end bonus may think twice about showering a loved one this year with the fanciful mix of piping pipers, leaping lords and assorted birds lauded in choruses of the classic carol “The 12 Days of Christmas.”
Rising prices for birds and gold pushed the cost of the 12 gifts — from the partridge in the pear tree to the 12 drummers drumming — up by 9.2 percent to $23,439.38, according to PNC Wealth Management, the second-biggest increase since the Christmas Price Index was started 27 years ago. The biggest rise was a 16 percent jump in 2003.
For the True Love in the song to bestow all the gifts repeatedly over 12 days — meaning 12 partridges in 12 pear trees and so on — would cost nearly $100,000, PNC said.
While the PNC index typically is close to the rise in the Consumer Price Index, this year there was a wide gulf, with the C.P.I. rising only 1.1 percent in the 12 months through November.
“We have a smaller basket of goods and services compared to the Consumer Price Index,” said James P. Dunigan, PNC’s managing executive of investments. “The federal index tracks a broader range of factors, including food, energy and housing, but typically we see more of a parallel. We hope this is an aberration.”
Only four items on the Christmas list — the pear tree, the four calling birds, six geese a-laying and the eight maids a-milking — remained at last year’s prices. The maids earned the minimum wage, $7.25 an hour, which stayed the same this year after three years of increases, for a total cost of $58, according to PNC.
This year, the bank has illustrated the index with a colorful popup book on the Web site pncchristmaspriceindex.com. PNC hopes the online book will make the index more interesting to primary and secondary students and help them learn about economic principles and trends, Mr. Dunigan said.
Gold prices were a big factor behind this year’s higher price tag, he said. “Gold has been on a rip for a while,” he noted, and the escalating price drove the song’s five gold rings up 30 percent, to $650 from $500 last year. Even so, the percentage increase was more modest than last year, when gold rose 43 percent, after relatively stable prices in 2006 and 2007.
Fowl prices also rose. The cost of French hens surged 233 percent, to $150 from $45, for the required three birds. The crested ornamental bird, called a Houdan chicken after the French town of the same name, was more expensive this year because of higher feed costs and greater demand, Mr. Dunigan said.
The two turtle doves went up 78.6 percent, also because of scarcity, to $100. The prices were based on information provided from bird hatcheries in Illinois and Missouri, Mr. Dunigan said. The cost of the lone partridge rose 20 percent, to $12, but the pear tree remained steady at $149.
Increases in the wages and benefits of some entertainers — after no increases in 2009 — pushed the cost of the nine dancing ladies up 15 percent, to $6,294 from $5,473. The 10 lords a-leaping cost $4,766, up 8 percent compared with $4,413 last year. The 11 pipers and 12 drummers went up 3.1 percent, to $2,356 and $2,552, respectively. The figures were based on information provided by the Philadelphia Dance Company, the Pennsylvania Ballet in Philadelphia and a musicians’ union.
The index’s most volatile component — the seven swans a-swimming — rose by 6.7 percent, to $5,600. Each year PNC calculates its index two ways: with and without the expensive and unpredictable swans. But the end result this year was nearly the same whether the swans were counted or not.
The biggest hit to the wallet was for anyone who yearned to bestow all 364 gifts repeated in the holiday song. That total was $96,824, up 10.8 percent from last year’s total of $87,402.
And few bargains were to be found ordering the gifts online, where shipping costs pushed the basic gift package to $34,336, up 9.2 percent from a year ago. The complete version, with online shipping costs, rose 8 percent, to nearly $137,852.
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23rd December 2010 at 11:01 pm
Reverse Engineer says:
From Zero Hedge:
Outlook 2011: Crude Oil & Gasoline, Escalator Up and Elevator Down
Submitted by asiablues on 12/23/2010 21:46 -0500
Bank of AmericaCommodity Futures Trading CommissionCrudeCrude OilFederal ReserveGlobal EconomyIndiaInternational Energy AgencyLehmanLehman BrothersMerrill LynchMiddle EastOPECRecessionrecoverySovereign DebtUnemploymentVolatility
By Dian L. Chu, EconForecast
Just in time for Christmas, On Wednesday, Dec. 22, U.S. gasoline prices hit an average $3 a gallon for the first time in more than two years, according to AAA’s Daily Fuel Gauge Report. Meanwhile, U.S. stocks and oil also climbed to the highest levels since 2008.
Crude = 71% of Gasoline Price
Crude oil is the biggest component, and accounts for about 71% of the price of gasoline as of Nov. 2010, based on EIA estimate (Fig. 1). Roughly, for every one dollar increase in the per barrel (42 gallons) price of oil, gasoline prices rise 2.5 cents per gallon. So, a ten-dollar rise in crude price per barrel would add about 25 cents at the pump, not accounting other components.
Crude Prices Defy Ample Supplies
This new gasoline high came just as crude oil also reached a two-year high as traders bid it up after U.S. Energy Dept. reported a week-on-week inventory draw, while unusually cold weather in the United States and Europe has also helped.
Oil futures for February delivery rose to $90.48 a barrel, the highest since Oct. 3, 2008. Prices have climbed 14% this year, and up about 26% since late August. And by the way crude oil prices are climbing; you’d think there’s a supply shortage. Totally not so:
•The week-on-week crude inventory draw was largely due to refiners’ year-end strategy to minimize potential taxes on year-end inventory.
•Despite a weekly draw, crude oil, along with products inventories (except distillate), all saw a year-over-year increase (Fig. 2). Crude inventory level is still above the average range (Fig. 2), while gasoline inventory is also close to the high end of the average range.
•If there’s strong demand elsewhere around the globe, as many have suggested, there should not be such a build in the domestic inventory.
•The global physical oil market also tells a similar story. WSJ reported that the International Energy Agency (IEA) estimates OPEC spare capacity is around 6.4% of global demand, nearly double the level of late 2007. Data from Oil Market Intelligence also indicate the world oil inventories stood at 20 days worth of demand, up from 14 days in November 2007.
Gasoline Prices Defy Historical Pattern
Moreover, gasoline also saw some unusual movement. Gasoline prices in the U.S. generally follow a seasonal pattern – prices typically rise during summer driving season and drop after Labor Day. However, the EIA reported that there’s a reversal of pattern this year – the national average price has risen by 30 cents per gallon since Labor Day (Fig. 3), the largest increase over that period since 1990.
Blinded by Santa
Meanwhile, many analysts, including the EIA, attributed the run-up in crude prices and the reversal of historical pattern in gasoline prices to strengthening global product demand and firming economic growth in the U.S.
However, people seem to have been blinded by Santa as to the obvious:
•An above $3 a gallon gasoline price during the third week of December was last seen in 2007– one year prior to the financial crisis.
•The last time, any time during the year, the national average for regular unleaded was above $3 was in 2008, when crude reached an all-time high of $147 a barrel!
Bear in mind, the unemployment rate was 4.6% and 5.8% in 2007 and 2008 respectively when gasoline was above $3 a gallon, and there was actually a global supply crunch due to robust (pre-crisis) global growth.
What’s Wrong with This Picture?
In contrast, here we are in 2010, barely out of the Great Recession, the jobless rate is hovering around 10%–twice the levels in 2007/08–while the housing sector remains under intensive care with existing home sales down 27.9% year-over-year in Nov.
So, it begs the question– what’s wrong with this picture? How could crude oil and gasoline be at this price level given ample supplies, and a lack luster macroeconomic condition?
QE Liquidity Euphoria
As discussed before, one thing the U.S. Fed’s QE has accomplished is building up concerns about the possible inflation. Expectation of inflation, improving global growth, and increasing risk appetite because of the U.S. Federal Reserve’s QE pumping up the economy, have driven investors to plow money into the commodities and stocks at a record pace.
This massive QE liquidity is also a major factor in the current strong correlation between WTI crude and S&P 500–another reversal of historical pattern. So, it is no coincidence that the S&P 500 index also hit its highest level since the collapse of Lehman Brothers.
The broader equity and commodity markets, including crude oil, are artificially supported by the U.S. Federal Reserve, and largely detached from the market demand and supply factors, where traders/speculators will run the show at least through 2011.
More Downside Possibilities
Most agencies forecast the world oil demand to outstrip supply in the long run; however, during next year, there could be a lot more downside possibilities than upside surprises. Some of crude oil’s downside possibilities in 2011 could come from one or a combination of the following (but not limited to):
•China & India Slowing Growth & Oil Demand – Beijing just slapped a 4% hike on domestic gasoline and diesel prices effective Dec. 22. India is also expected to decide whether to increase state-set fuel prices amid crude oil at near two-year highs. This and other tightening measures to fight inflation would crimp growth as well as oil demand in both countries, the major growth engine of the world.
•High oil prices could trigger a global recessionary cycle – Bank of America Merrill Lynch estimates that a $15 rise in the price of oil could shave about half a percentage point from U.S. economic growth in 2011, enough to wipe out the Fed’s QE2 effect.
•A deepening European debt crisis
•Escalating geopolitical tensions in N. Korea, the Middle East, etc.
•U.S. sovereign debt and/or municipal debt crisis
And don’t count on a U.S. recovery to be the upside surprise factor either. The EIA Short-term Energy Outlook published on Dec. 7 projects gasoline consumption in the U.S. to increases by 0.4% and 0.8% in 2010 and 2011 respectively.
$110-$115/bbl by April?
Technically speaking, crude could see some profit taking in January with major support at around $89 levels. Look out below if it breaks resistance of $87. On the upside, the next two key resistance levels should be at $95/b, and $100/b respectively (See Chart)
Nevertheless, if the stars are aligned, that is, global economy really picking up stream with two consecutive months of good U.S. jobs numbers, inflation concerns and QE could form a perfect storm for crude to hit $110 to $115 a barrel late March or April next year, after a few retirements, and if it breaks above $100. At that level, gasoline at the pump could hit $3.70-$3.80 a gallon range.
Escalator Up, Elevator Down
Right now, speculative longs are dominating the crude market with hedge-funds and other large speculators long positions outnumbered short positions by 205,890 contracts in the week to Dec. 14, according to the Commodity Futures Trading Commission (CFTC).
Whenever you have an over-bullish market like this, it sets up for increasing risk and huge swings, particularly for crude oil, as it is one of the most widely traded and speculated asset classes in the world. Liquidity could only drive prices up to a point as there is no real strong demand to support the lofty $100+ crude price levels, but plenty of land mines to spook an exit en masse.
So, expect volatility to be the major theme in the New Year with crude oil taking the escalator up, but the elevator down, and a couple of $12- to- $15 moves in both directions along the way.
Remember, the market is designed to fool most of the people most of the time. ~ Jesse Livermoore
Dian L. Chu, Dec. 23, 2010,
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23rd December 2010 at 11:39 pm
ruined hope says:
Crude used to account for 71% of the price of gasoline back when the rack to retail markup was 10-30 cents per gallon, but back when gas hit $4.35 here the RBOB on NYMEX was still $3.35 wholesale, the markup went to a full buck a gallon and has averaged about 80-90 cents per gallon since. Unleaded is still about $2.40 while we (here) pay $3.20 at the pump.
True the price is volitile, but it is also still inflation, again everything is inflating other than real estate. Be glad you do not live in the Pacific Northwest where electric power is going up by 14.6% next week, on top of the 6% increase they got this year. What eats me is the news is pounding headlines out about how great the economy is, how fast it is growing, how much people are spending on Christmas, etc. I suppose trillions in stimulus will allow some areas to look like they are doing better, but the hollowing out of the middle class is accelerating not getting better.
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23rd December 2010 at 11:45 am