Tuesday, November 11, 2008

Current Events: Oil Price Yo-Yo now Walking the Dog

Once they have the basic down-then-up motion mastered, one of the very first tricks novice yo-yo practitioners attempt is called "Walking the Dog". This is where the down motion is followed by the yo-yo continuing to spin while staying down (called a "Sleeper") and is then allowed to roll across the floor a bit. With practice, a prolonged "walk" will end with a subtle wrist flick that sends the yo yo flying back up to return to the hand from which it came. Very predictable once you get the hang of it.

Translation: oil's at $59 a barrel tonight and showing no sign of returning to $100, let alone its recent high of $145 anytime soon. And attending the oil price fall, US gasoline prices have dropped for the 17th straight week and are now under $2 a gallon in some locations. In fact, it's not clear that the oil price yo-yo is even in "walk" phase yet.

At the same time, anemic US auto manufacturers are indicating that they're on the verge of collapsing if they don't get a Federal infusion pretty soon. They've already been lent billions to retool to build cars that get far better mileage. Left to their own devices, they weren't ready for this summer's price spike, and they're not ready for the economic downturn now. Lessons for those steering the US economy and industrial base are many, not the least of which is that in a peak oil climate, whatever the price of oil is today, that's what it's least likely to be tomorrow. Ditto for 1, 5, 10, 20 years down the road. Future DOD planning needs to take this volatility as a given and not let it get in the way of specifying systems that are far less impacted by this highly volatile commodity.

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