<!doctype html public "-//W3C//DTD W3 HTML//EN"> <html><head><style type="text/css"></style><title>Re: [lbo-talk] the petro-thusians</title></head><body> <div align="center"><br></div> <div> <br> </div> <div><font face="Georgia" size="+2" color="#A80000">Andrew McKillop: Oil prices ... fiscal folly beings at Fifty-Five</font><br> <font face="Verdana" size="-1"></font></div> <div><a href="http://www.vheadline.com/readnews.asp?id=22909"><font face="Arial" size="+1">http://www.vheadline.com/readnews.asp?id=22909</font></a><br > <font face="Verdana" size="-1"></font></div> <div><font face="Georgia" size="-1"><b>VHeadline.com oil industry commentarist Andrew McKillop writes:</b> The G-7 finance ministers meeting of May 2004 to ‘solemly request’ that OPEC produce more and bring the price down was a sign that the old adage ‘Fear begins at 40’ still holds true.</font><br> <font face="Verdana" size="-1"></font></div> <div><font face="Georgia" size="-1"><b>Recent weeks have shown those same finance ministers and their central bank governors or presidents in much less rational mood.</b></font><br> <font face="Verdana" size="-1"></font></div> <blockquote><font face="Georgia" size="-1">No longer demanding the impossible -- that OPEC delivers oil at less than US$40-per-barrel through magically producing much more -- those same central bank directors are now preaching their own WMD: the interest rate weapon.</font><br> <font face="Verdana" size="-1"></font></blockquote> <div><font face="Georgia" size="-1">Anytime now, when oil prices climb through the ‘psychological ceiling’ of let us say $55/bbl, the round of small-and-predictable interest rate hikes by symbolic and tiny increments of 0.25% is likely to change gear and get more muscular.</font><br> <font face="Verdana" size="-1"></font></div> <div><font face="Georgia" size="-1">While the big chiefs of the central banks do not sully themselves giving any numbers, their smaller minions are happy to give off-the-record, or ‘anonymous source’ interviews to the media. These pronouncements are echoed by eager and very concerned ‘experts’, such as those employed by Yergin’s CERA, who can recall way back times<i> (the early 1980s)</i> when the world, like today, was menaced by 'extreme oil prices'.</font><br> <font face="Verdana" size="-1"></font></div> <div><font face="Georgia" size="-1">Utilising ‘fiscal rigor’ in the early 1980s to fight overpriced oil featured double-digit interest rates, delivering an economy that showed another kind of rigor --<i> rigor mortis</i>. Only this, intense economic recession, reduced world oil demand enough for prices to finally be brought down, five or six years after ‘fiscal rigor’ was decided.</font><br> <font face="Verdana" size="-1"></font></div> <div><font face="Georgia" size="-1"><b>Several keywords, that is slogans, are recycled in the media by fit-to-print oil ‘experts’ and up-and-coming, but anonymous central bank minions.</b></font><br> <font face="Verdana" size="-1"></font></div> <ul> <li><font face="Georgia" size="-1">In fact, however, the only real arm in the nearly bare closet of measures, ways or means to ‘fight overpriced oil’ is the IRW or Interest Rate Weapon.</font><font face="Verdana" size="-1"></font></ul> <div><font face="Georgia" size="-1">When or<u><b> if</b></u> interest rates are racked up by 0.5% or even 0.75% each time that central bankers decide to call a hike<i> (to avoid 'overheating' or to cause a 'soft landing')</i> we can be sure that we are in crisis times.</font><font face="Verdana" size="-1">...</font></div> </body> </html>