Lots of action in oil prices today, as the unrest has spread from Tunisia and Egypt– which produce relatively modest amounts of crude oil— to Libya, the country sandwiched between them, and producer of over 2% of the world’s crude oil supply. Rather than try to guess where those developments are going to lead, I wanted today to try to make sense of another equally striking development in oil markets over the last 6 weeks– the disparity between the price of oil in the Midwest United States and that elsewhere in the world.
Author Archives: James_Hamilton
New indications of inflation
Where are the inflationary pressures?
Money and reserves
I wanted to offer some clarification on stories about all the money that the Federal Reserve is supposedly printing. It depends, I guess, on your definition of “money.” And your definition of “printing.”
Progress report on QE2
We’re now 3 months into the Fed’s new asset purchase program that has been popularly described as a second round of quantitative easing, or QE2. I thought it would be useful to take a look at what has actually changed during the first 3 months of QE2.
Saudi oil reserves may be overstated by 40%
Stuart Staniford calls attention to this story from the Guardian:
The U.S. fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.
The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels– nearly 40%.
Stuart also notes that in his own independent forensic analysis conducted in May 2007 (to which we called the attention of Econbrowser readers at the time), he estimated that remaining reserves in Ghawar (by far the Saudis’ biggest and most important oil field) were overstated by 40%.
The employment news is good (I think)
The Bureau of Labor Statistics reported yesterday that the unemployment rate has fallen from 9.8% in November to 9.0% in January, as big a two-month drop as we’ve seen in the last 50 years (hooray!). But in the same report, BLS indicated that their seasonally adjusted estimate of the number of Americans employed on nonfarm payrolls increased in January by an anemic 36,000 (oh dear!). Reconciling the very contradictory claims is even harder than usual, but I’ll give it a try.
An improving economic outlook
Looking a little better each day.
Geopolitical unrest and world oil markets
Change is on the way in the Arab world, with Egypt the latest focal point. Here I review recent events and their implications for world oil markets.
A modestly brighter GDP report
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 3.2% during the fourth quarter of 2010. That’s about the historically average growth rate. But we expect much better than average at this point in the cycle, and need much better than average to make real progress with the unemployment rate.
Real-time analysis of the Aruoba-Diebold-Scotti Business Conditions Index
One of the economic indicators to which we frequently call attention is the Aruoba-Diebold-Scotti Business Conditions Index that is maintained by the Federal Reserve Bank of Philadelphia. This uses a number of important economic indicators immediately upon release to get an updated view of the overall level of economic activity. One question that arises in using this index is that the raw data from which the index is constructed can be subject to considerable revision in subsequent data releases. A new analysis by the authors takes a look at this issue.