Interview: Chart of the day
>> it is the king of all gas guzzlers, the hummer. if you wanted to fill it up last week t cost a record $74. new evidence that americans may feel pain at pump. wholesale gas prices reached a record $1.71 ra gallon last week. adjusted for inflation, the highest level since march 1984. here to put it in perspective is editor-at-large tom keene in our “chart of the day.” we have been tracking for months the inflation-adjusted number. seems like it is moving back to some levels that people are getting concerned.
>> you know about the hummer because i have seen you on the west side driving your hummer. $74 to fill it up. here’s the chart. up to record highs today in the spot price. green line is the one-year moving average. that’s what economists look at. it smooths things out. what is important here is the green line is above the moving average near the persian gulf war in 1991. nicely above that. 20% higher in price. not back nearly to the teens in the 1970’s and 1980’s. we’re getting there. it’s moving along.
>> you were listening to the interview i did with brendan kyne. he talked about prices for this particular point of a season which is interesting when you think of being in the peak driving season and the prices at this level.
>> that’s true. there’s an ebb and flow to it, nuances to it that i don’t typically cover because we are talking about broader economics. our team in new york and london are looking at those nuances and we’re in the summer. the weather matters, travel mat aers. part of this up move, what i’m hearing from economist sincere about a buoyant economy. a buoyant economy creates a greater demand for hydrocarbon given slower moving supply growth.
>> what are the economists following on this chart?
>> what they’re following on this chart more than anything is a smooth average. they may not look at one-year moving average. they may look at the three-month moving average. what they’re interested in is a persistencey. that may be where they’re most wrong. not we’re at $50, $60, $70. the issue is we sustained above $50. the 200-day moving average well above $50 a barrel. it’s that persistencey. do we keep moving up and raising that overall level.
>> let’s talk about differences between the 2005 economy and that 1984 economy since we’re trying to make comparisons.
>> i aou see the white arrow going back here. what a difference. much more service sector. much more commodity-based. not using hydrocarbons as a percent of g.d.p.’s like we used tofplt i spoke to mr. taylor of the kcato institute and he emphasized incomes of americans are so much greater now on an inflation-adjusted basis. that’s another reason we’re not feeling the pain. as a society which is wealthier than back in the 1980’s t.may take a higher price for that to click in.
>> that’s a key question for economists and investors looking at this market . at what point do consumers start to react? what things are you hearing?
>> i heard many people a year ago telling me $2.40 a gallon. we are only now see ago shift from heavier-weighted cars like a hummer to smaller cars. some say as high as $3. inflation adjusted back in 1979 is $4 .70 a barrel give or take a dime. so we’re a long way from that pain of $4 a gallon, $4.20 a gallon in today’s dollars where you start to see a kind of habit that we saw in the 1970’s and 1980’s.
>> it will be interesting to tie it into the economic data this week. inflation data and retail sales. >> very much so. how will hydrocarbons fill into the c.p.i. number? more importantly when you take it out what is left with the core data, particularly with the fed speeches coming up.
>> always a pleasure. tom keene, editor-at-large at bloomberg news. let’s take a quick break. when we come back, continuing to be about energy. more details on the surge we saw in natural gas. one of the world’s biggest movers. that’s next on “after the bell.”
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Listen Chart of the day
>> with oil hovering at $60 a barrel, one economist says we should pay close attention to canada. the currency may be the strongest among the g-8, the group of eight member nations within the next decade that. according to carl weinberg. here to explain is our editor-at-large tom keene with our “chart of the day.” to start off, you mean shrl the luny.
>> the canadian dollar. carl weinberg is not saying next week or next year but looking outs five years, 10 years, 15 years the loonie will be a giant in oil economics. instead of the petro-dollar, you have the petro-loonie. you seat long-term weakness of the canadian dollar. here’s repeat strength. what he suggests is terrific strength. he doesn’t give us a level that it will go to but the idea is that with this new price of oil, economically in feasible areas now become feasible. speak of which, alberta, where you have oil tarsan to the tune of millions of revenue per year, $200 billion of revenue is some initial calculations if oil stays at $06 or moves higher. why is it so important? john snow visited alberta last week. why waot treasury secretary --
>> tell us why.
>> first trerbgry secretary in two decades to attend and he started his trip in calgary 466 miles northeast of calgary in fort mcmurray, alberta, in the middle of nowhere because that’s where the oil s.he wants canadians to know we care about that oil because other people care as well such as the chinese.
>> so much more talk of the oil fans. in recent months we hear that expression a lot more. people focused on this endeavor to get more oil. what increased production are we seeing already?
>> i don’t think we’re seeing that much already. i don’t pretend to be an expert in this. what weinberg goes back to is the idea of sustained prices. if oil goes back to $40, this may not occur. the 200-day moving average is above $50 a barrel if we stay up here. if we stay at $60, if we go higher, $70, $75, it becomes very, very feasible. you have a lot of oil coming out of the ground. it has to go somewhere. the united states is right next door.
>> in terms of the expression the petro-loonie, you talk about this decade time frame, not tomorrow, not next week, not next month. why start talking about it at this point? is this clearly the direction it is headed in his mind? ao see not predicting where oil will go. he is observing it at new levels that the economics click in and it begins to be feasible. all the oil companies climb on not thinking one year, two year. whenlboard. remember, these guys are think you want to build refineries, pipelines, capacity, you have to think outside in 10 years. they think it is feasible.
>> back to the chart. one thing that is interesting with it is the fact that for so long we had a three-year trend where the dollar was weaker against the euro. but you see this incredible strength for the canadian dollar coming at a time when the u.s. dollar has started to turn around. give us insight here what may be happening.
>> the insight is commodities. canada we perceive as a commodity-based economy. it’s true. it’s still very much commodity- based economy led by oil. you see here that the commodity rally, some would say led by the explosion of goods development in china, that’s not really ended. a little dollar rally. it’s a blip on a 35-year-old map.
>> tom, thank you for dropping by. tom keene with our chart of the day. in the meantime, a quick break. when we come back, the latest world and national headlines. also we’ll continue this look at commodities and at oil. our “world’s biggest mover” segment is a look at gas market in the wake of hurricane dennis. we’ll be back straight ahead.
