An article in today's Washington Post headed "A Price Inflamed By Fear - Up to a Third of Oil's Stunning Ascent Traces to Psychology" gave us a recitation of today's events in Lebanon and informed us of the obvious, that the violence and tension around the world had once again driven up the "political premium of oil." It then went on to list the usual litany of additional oil market concerns from Nigeria, to Iran, to the possibility of a hurricane in the Gulf of Mexico, and on.
All well and good.
But then, quite gratuitously, added: "Though oil prices set a record for the New York Mercantile Exchange, which started trading in 1983 they still didn't match the all time inflation-adjusted peak. A quarter-century ago, after the Iranian revolution and the outbreak of the Iran-Iraq war, the price of crude oil climbed to over $90 when expressed in today's dollars".
There, do you feel better?
Without question, oil interests are delighted with the Post's logic. This is the kind of obfuscation we are being fed by much of the media (and the oil industry), to make us acquiesce to these egregious price levels for crude oil (topping $78/bbl). For too long has this kind of oil patch pitch been passed along to a gullible public as insightful reporting on this issue.
What the Post didn't tell us, were the same parameters applied to gold, which after all is meant to be a bellwether for inflation and political risk, we would be paying circa $1700 per ounce today. Gold was selling at over $800 per ounce at the time and inflation base of the Post's calculation. Gold closed today not, I repeat not, at $1700/ounce but rather at $670/ounce! So, thank you Washington Post. We are all going out immediately to our neighborhood jewelry stores and maxing out our credit cards on gold rings, bracelets, necklaces, and tiepins.
And in return a word of advice to the Washington Post. Don't send your reporter on assignment to Amsterdam. He'll come home stocked up on tulips.