Time for a short self-congratulatory post (For if I don’t do it, who will?).
Right before the Fourth of July, I wrote that the price of oil was a bubble waiting to be pricked and nearing a short-term top. In the past three weeks, the price of oil has fallen by about $20 bucks a barrel, or almost 15 percent, a huge move by any standard. In terms of daily closing prices, July 3rd ended up being the exact top.
I also correctly pointed out the main reason usually cited for the fall-off: Decreased demand due to a weakening economic picture, particularly in the U.S. and Europe. I also believe the fact U.S. government officials have been speaking out against an Israeli attack on Iran’s nuclear production facilities has helped. I do not think any of George W’s jawboning about offshore drilling, nor Congress’ subsequent investigations into oil market speculation, had any real impact.
However, I wouldn’t start planning to buy that new SUV just yet. I am a bit concerned that we didn’t get that last parabolic move in the price of oil that I thought we’d get. Bubbles don’t typically fizzle out; they tend to pop in dramatic fashion. So I still believe another big move higher, one that potentially busts through July’s high of $147, could be forthcoming.
In other words, this is one hot-button election issue that won’t be going away anytime soon.
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