Oil tops $109 per barrel

Mon, May 12 2008

— Steve Boggs
sboggs@cnhi.com
Wednesday, yet another high in a string of record-high closing prices on Wall Street. Gas in Weatherford hit $3.15 a gallon, and dire predictions of $4 a gallon are the talk of the town.
Energy prices have finally driven the American economy into recession, and we’re all feeling powerless to slow down their relentless climb.
At some point over the past five years, the price of crude oil became an intangible benchmark. It is no longer controlled by fundamental market conditions, but rather by rumor, innuendo and speculation. If a guy with a gun burps in Iran, the price jumps. If Hugo Chavez wakes up in a foul mood, the price jumps. If the wind blows more than 30 mph in Houston, the price jumps.
There is no rhyme or reason to today’s pricing structure. Our troops are in firm control in Iraq. We’ve had two benign hurricane seasons in a row. The Alaskan pipeline was broke, but got fixed. So what’s the problem now?
Supply and demand are no longer in control. If they were, gas would be $2.50 a gallon, not $3.15. You can hang that other 75 cents on Wall Street, folks.
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