In a forthright television interview on June 2nd between President Medvedev of Russia and Maria Bartiromo of CNBC, the subject of oil prices was discussed -- an issue of particular concern to Russia as the world's largest energy exporter. The gist of the conversation was enlightening. Simply put, Medevedev confided that today's prices of $60-70 were a throwback to the prices of 2006, which was then perceived by Russia as generously high, and that he was puzzled why prices reached this level today.
President Medvedev clearly doesn't read the Financial Times. In a braying editorial on the same day, the Financial Times swept aside all doubt, instructing us in schoolmarm manner that "Oil [Is] Back To Normal" and that we should all put on our Alfred E. Neuman persona, and understand that the 100%-plus price rally in oil prices since hitting bottom earlier this year is no cause for worry. Well, if prices continue to go up, that could, according to the Financial Times, trigger inflation, being "a final straw for many sectors battered by recession." But again, hey, don't worry, because further immoderate price rises can be hedged against. Did you catch that Mr. and Mrs. Juarez? If gasoline and home heating continues to escalate as oil prices go up, taking a big chunk of your day to day living budget, don't worry. All you need to do is call your local broker and start trading oil contracts on the Commodity Futures Exchange. Simple as that!
The Financial Times, forever the apologist for any upward aberration in oil prices, goes on to compare the price movement in oil to other products such as agricultural commodities that "have all gone up." The fundamental differences are not touched upon. Soybeans and wheat deal with real problems such as dry growing conditions and limited stockpiles. Oil on the other hand functions under fabricated conditions with Saudi Arabia shutting in 4.5 million barrels a day of its oil production, while the rest of OPEC probably shutting in an additional 3 million barrels. All this while oil storage throughout most of the world is filled to capacity and scores of supertankers are at sea, loaded with oil, serving as auxiliary storage with nowhere to go to discharge their cargo. And not for the Financial Times to overlook the dollar's weakening as a further reason for a renewed spike in oil prices, without pointing out that the dollar has lost some 11% of its value since the outset of the year, while oil has escalated over 100%.
Far be it for the Financial Times to mention the machinations of OPEC, or the trading aberrations on the commodity exchanges. They all seem to be club members and therefore above reproach. But that breath of fresh and candid air coming from Russia, now that's a most pleasant change.