It's hard to read the headlines of the past several years and not come to the conclusion that the world, or at the very least the United States, is awash in oil. In fact, the Energy Information Administration announced last week that oil inventories in the United States are approaching an all-time high. Meanwhile, last year, thanks to shale drilling, U.S. crude production rose to the highest level in a quarter century. The United States is set to overtake Saudi Arabia as the world's largest producer of energy.
By most fundamental measures, oil prices should be declining. So why is Brent Crude at nearly $110 a barrel, close to multi-year highs?
As I write in my new weekly commentary, there are a couple reasons that, despite the surge in domestic production, oil prices have reverted back to the upper-end of a multi-year trading range:
By Michael Lombardi, MBA
We are told that in the month of January, inflation in the U.S. economy increased by one-tenth of a percent. In February, prices increased by a similar percentage. In the entire year of 2013, the "official" rate was only 1.5%. (Source: Bureau of Labor Statistics web site, last accessed April 8, 2014.)
Some economists are calling for even less inflation in 2014 and even outright deflation (a period when prices decline).
This is absurd! Anywhere you look, things are costing more each passing day.
Consider the chart of gas prices below. Since the beginning of the year, spot prices for gasoline have increased by eight percent.
(click to enlarge)
Chart courtesy of www.StockCharts.com
Unfortunately, gas prices aren't the only thing that has gone up. Basic food prices are skyrocketing, too!
Since the beginning of the year, corn prices have gone up 22%. Coffee prices are
I recently wrote an article about the farmland bubble, but focused mostly on who would be hurt.