Completing That Thought

Glenn Reynolds linked to our observations regarding the Navy's aircraft carrier availability leading into this summer, but how he did so is interesting. He intensifies the intent regarding the activity by attaching to the link an email he received. I quote in full to make a point.

I GET AN EMAIL NEWSLETTER from an oil trader and today it includes this tidbit: "In an interesting twist of OPEC news - in the folder titled 'Adequate Supply' - Iran has chartered an armada of supertankers to act as floating storage for as many as 28 million barrels of crude oil that is backing up on them. Analysts are blaming worldwide refineries yet to recover from maintenance programs. It’s not the first time that Iran has had trouble finding buyers; they temporarily floated 20 million barrels in 2006. No, I can’t explain this in light of record oil prices and continual cries for more release of OPEC crude oil. "

U.S. crude stocks are up, too. This is unlikely to be the case, but here's a thought: If I were, say, the United States government, and I anticipated military action in the mideast that might interrupt oil supplies, I wouldn't want to stockpile directly because that would be a tipoff. But if I manipulated markets into running up stocks, I wouldn't have to. . . . Nah. They're not that smart.

The theory is interesting, but requires evidence of market manipulation to be credible, the rising price of oil is both real and speculated and not a very good measurement alone. On that note I checked out the latest market numbers to see if there is any evidence of manipulation. The economic news is good, trade deficit is down to the lowest point since 2003, which should help our nations GDP, but as I continued reading this jumped off the page despite being buried deep in the reporting.

Imports of industrial supplies fell 3.2% to $61.6 billion, including an 8.9% drop in petroleum imports.

The average price of oil rose to a record $89.85 a barrel, but demand fell 9% to 8.97 million barrels a day.

Other news tells the rest of the story, Steve Mufson tracks gasoline consumption, and while gasoline consumption is up .03% in April, consumption is down for the year.

So let me get this straight. Supply is up, demand is down, consumption is down, but the price of oil is rising to record highs? Glenn might want to think about the sentence he didn't complete, because the word "manipulation" may apply.