Oil price cliff diving and a whiff of deflation is in the air
Oil has traded as low as $68.57 today, its lowest since August 2007. Gold is down $40 to below $800 an ounce. And all other commodity prices are getting pummeled.
Now, I certainly foresaw some major declines in commodity prices as a major recession took hold, the speed of everything unfolding has surprised me as well. The decline in prices is good news for consumers who were getting beaten up by high fuel and food costs, but you have to wonder if this is too much of a good thing.
Are we headed toward deflation?
About Edward Harrison
- Deflation has already arrived 21 Jun 2008
- Inflation or deflation? 30 Jun 2008
- The inflation-deflation debate 21 Jul 2008
- Credit deflation and the Japanese problem 16 Jun 2008
- The inflation – deflation debate redux 10 Aug 2008
I have this belief that the credit problems could lead to an disturbance in commodity supplies. Doesn’t everyone that stocks their shelves, or fill their gas station reservoirs all based upon credit? They can’t pay cash for all of this can they? I would expect a run up in commodity prices if things continue on this path, how do you feel?
I’d probably say no on the price run-up due to credit problems. The underlying supply demand changes are too great and the credit crunch is now leaving its most acute phase in my opinion.
All of that said, I do see oil bottoming out here. I am not bearish on oil at these levels.