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Crude Oil (and Everything Else) Is Going Down

By JLP | May 20, 2010

Crude oil is now down nearly $20 per barrel from its recent highs. As a guestimate, I would say it’s down about 21% from its high this year.

The real question is: how long can we continue with subdued inflation? I read a front page article in today’s WSJ about how inflation is at a 44-year low. The WSJ claims this is a “sign that high unemployment and excess production capacity are holding down wages and prices in much of the developed world.”

I also found this little tidbit from the article interesting:

“Wednesday’s U.S. inflation report offered evidence that retailers are holding off on price increases, even though prices of raw materials ranging from lumber to cotton are rising amid strong demand from Asia.”

Eventually prices have to rise.

Topics: Economics, Oil | 6 Comments »

6 Responses to “Crude Oil (and Everything Else) Is Going Down”

  1. Beeg Says:
    May 20th, 2010 at 12:58 pm

    As long as banks aren’t lending, no inflation.

  2. Ron Says:
    May 20th, 2010 at 2:25 pm

    Gives additional credence to “sell in May and walk away.” I sold my index fund shares last week and boy am I glad. I think I’l just sit in cash for a while since I made 52% from February of 2009 (all in a Roth).

    Not complaining about oil going down though.

  3. Rex Huston Says:
    May 20th, 2010 at 2:57 pm

    china’s markets have been down with the rest of the world lately. If that trend continues there will be less demand from Asia causing commodity prices to drop as well, which will in turn cause more price deflation. Inflation will no longer be subdued, it will be negative.

  4. ctreit Says:
    May 20th, 2010 at 3:13 pm

    I agree with Rex. Deflation is probably more likely and would cause a bigger problem than inflation. There is not much pricing power in the economy.

  5. Jonas Says:
    May 23rd, 2010 at 2:13 pm

    We’ve seen a massive decoupleling from the S&P against euro stocks, which pushed oil also a lot lower. This decoupling is going into correction mode, so that means oil will spike up 20$ or oil will sink another 20$ anytime soon. 2 to 3 weeks.

    My guess: Up because the euro panick is easing and overall earnings on US stocks have outperformed concensus on the upside by about 76%.

    I sold all my puts and now I’m long since friday.

  6. Jack Goldman Says:
    June 12th, 2010 at 11:06 am

    Debts have to be defaulted on. They will never be paid unless it’s with fake pretend money printed for nothing. There is so much debt to unwind. How can this be done without collapsing the existing holds of this debt. The bond holders are always bailed out and the common stock holders are wiped out. That is what the New York City bail out was all about. Bond holders can never lose money. Stocks get wiped out. Debt is the problem. How to unwind and pay off all the debt? Zero interest rates help. The system is losing it’s integrity. Too much fake paper money. I invest half depression and half hyper inflation which kind of cancel each other out. What to do?