Looked at IMF data that showed for every 1% move in the dollar value, oil is impacted 1.5% roughly in the long term, 5 years. In 02, oil was around $30 and the dollar index was 120. Applying that relationship gives you a $50 oil price. Actually, their numbers were oil should be at $65 vs $95, early 08 price. The extra $50 dollars is demand, supply driven. I used to think Boone had a grip on oil prices but I'm not convinced he has the whole answer but maybe all he cares about is 20% of the gain for this year. I will propose the radical idea that as Greenspan used to say, the economic laws have not been rescinded, although he tried. Price will temper demand, even globally, and will drive supply. Look at what has happened with domestic nat gas reserves with $8 prices. Most of these unconventional reserves wouldn't be in play without it.
I am still trying to imagine what will temper this global rise. Everyone seems to think that global growth is unstoppable, but could it be set back for a period of time. The IMF has already cut its global growth figure to less than 4% from a few months ago. And Caterpillar sees it at around 3%. One commentator says 3% global growth as a recession. And inflation seems to be a persistent problem in emerging economies.
After trying hard to oppose this nagging negative position, can't seem to get there. The US may be near a bottom but the globe could be at a top, for a while, and the result is a transition of some duration. May be hard for the markets to accept because the Fed has always bailed us out, which delayed, even fueled world growth, and caused this current pain, and there may not be much they can do, or should do.
ALL, speaking of inflation---just spoke with someone working on the new "palm" in Dubai. They are moving at a break neck pace to get their project off the drawing boards with inflation running at 30%. But like this guy says, it's not like these sheikhs are taking out loans or anything. Dennis Gartman reverses position on gold I heard on radio---but can't dig it up on Bloomberg yet- wonder what THAT's about. PARK
Lead article in NYT's Week in Review, "The Big Thirst". Seems to be a rehash of the issues, more on the fear side, but the next to last paragraph talks about US gas mileage standard to be 35 mpg by 2020. The same goal could be reached overnight if everyone drove a Honda, its fleet averages 35 mpg now. You don't get behavior change without some pain. Could be on the way.