Last night, 60 minutes revisited the 2008 surge in the price of oil. In 13 minutes, it laid the whole thing at speculators’ feet.
Barry Ritholtz provides the nuance. Yes speculation played a role, but the oil price spike was a heck of a lot more complicated than that.
- The dollar collapsed, almost doubling the dollar-denominated price per barrel (it has since recovered some).
- Two wars–Iraq and Afghanistan–created the potential for supply disruption.
- The global economic expansion of the past 8 years ballooned demand.
- All commodity prices rose, from soy to metals.
- With the Fed funds at 1%, inflation zoomed.
- Americans (consumers of 25% of the world’s oil) drove more and used more gas getting there as the SUV gained in popularity.
- Once gas hit $4, people changed their behaviour and prices fell.
- Mike Masters, the heroic hedge fund manager who told Congress what it wanted to hear (it was all speculation), was talking his book.
- China boomed
- Geopolitical threats from Iran, Venezuela, and Nigeria, all factored in
- Peak oil: Production did not meet rising demand
If you’re still interested in the 60 Minutes piece, we’ve embedded it below.
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