hm.

[solarbird]

An idle thought: coal futures are sharply down. Oil futures are down sharply again too. Supply has not really increased, and while there's some funny business with speculation and market interference against speculation going on in oil, and futures contracts are already entering the weak-demand autumn season for oil, I don't know that any of that is going on in coal.

So ticking off the various possibilities, I'm starting to wonder whether there's been a quiet cancellation of a lot of industrial projects out there in the background. (The manufacturing survey was not good, but I'm wondering whether the cancellations hit a critical mass.)

No actual data for this. Just a thought.

Comments

[futabachan.livejournal.com]

Devil's advocate: it could just be regression to the mean, or a correction indicating that the degree to which prices shot up recently was a little bit of an overshoot.

[solarbird]

Holy crap, you still exist! Hiya! ^_^

And absolutely so. I'm not claiming that is what's going on -it's just a thought, ticking in the back of my brain.

[firni.livejournal.com]

And I'M wondering how many people in the Bush administration shorted oil futures.

[llachglin.livejournal.com]

I think it's a combination of:

*Overshooting the sustainable price at the current level of supply and demand.
*Signs of weakness in a global economy that indicate a prolonged recession and a related drop in demand for energy.
*Enough people have shifted their behavior at the margins in reaction to price increases that it's affecting the price. The effect is a drop in demand, but for completely different reasons than the last point.
*Realization of the big picture: in the long run, the global climate crisis requires that we use dramatically less coal, gas, and oil. Alternatives are only just starting to become economical, but the long-term picture means 50-80% less consumption of these fuel sources, at most. High prices can only exist in the short and medium-term before we're forced to radically change our behavior in the long-term. Supply would have to drop much faster than anyone projects for price to keep up with falling demand.

We'll definitely overshoot on the way back down, too.

Krugman's got a good conceptual diagram of the current dynamic at his blog (http://krugman.blogs.nytimes.com/2008/07/19/oil-outlook/):

[wrog]

that's weird. I would have thought autumn would be a strong demand season for oil (e.g., heating oil)

[solarbird]

There's a demand dip first, before it really kicks in for the winter. Basically all of September, and, depending upon the year, much or most of October. (And in a really warm year, even into November.)