A 27 year high. Sure oil prices and petroleum prices rebounded after the Department of Energy's Energy Information Agency week over week numbers we not quite as bearish as the American Petroleum Institute report. And yes, oil rebounded as the stock market became positive. Yet there was something lost when we looked at only the daily factors.
Did anyone step back and ponder that the total U.S. inventory of oil and all petroleum products hit a 27 year high according to the EIA? Now just stop and think where the price of oil was 27 years ago and what kind of world we lived in 1983. Some things were different but some are the same. Ronald Regan was president and had just lifted wage and price controls on oil. It was the first year that the NYMEX had offered futures contracts on crude, the price per barrel was hovering around $30 a barrel. We were just emerging out of the of a 4 year recession that saw rapid job destruction and an unemployment topped out at 10.8%. Sound familiar?
Back in 1983 China, after years of erratic GDP growth, saw double-digit real GDP growth that was sparked by the first wave of foreign investment in China and the first year non-state enterprises were being allowed to develop. And not to mention my beloved White Sox had won the old American League West driven by the bats of the Carlton Fisk, Greg “the Bull” Luzinsky and rookie phenom Ron Kittle.
My point is that while the world has changed, some things remain the same and at a major turning point in the global economy it’s possible that we are moving in different directions. In 1983 President Reagan's 25% cut in the federal personal income tax, moderate deregulation and tax reform created one of the longest periods of high economic growth without significant inflation. Now we are in a period where the Fed is talking about printing more money and we are seeing more regulation and government control. These policies are creating commodity price inflation, driving up the price of oil higher than it would be normally.
How will this story end? Do we want more government control or less?
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org