Crude Rhetoric

Greenspan held a speech on Friday concerning the runup in oil prices. You have probably by now read at least a couple of comments upon it. Otherwise, here are a few of them, in the NYT, Washington Post, some more critical from Barry Ritholz, and have my take as well when you're at it: Greenspan really tried to tell the markets not to worry - oil prices will come down, he says. Look at long term crude contracts, oil for delivery in 2010 is cheaper that today's squeezed up oil, he tells us. And he is right. But what do you have, beyond the rhetoric well sounding of the wording in the speech? A crude oil market at $55 a barrel, only slowly getting cheaper to $35 a barrel out in 2010. All prices that are far above those of the old OPEC target-band. Could we now please see any central bank actually using these figures for macroeconomic prognosis work instead of wringing them into suggestive and misleading verses like these?

FRB: Speech, Greenspan--Oil--October 15, 2004: "Prices for delivery in 2010 of light, low-sulphur crude rose to more than $35 per barrel when spot prices touched near $49 per barrel in late August. Rising geopolitical concerns about insecure reserves and the lack of investment to exploit them appear to be the key sources of upward pressure on distant future prices. However, the most recent runup in spot prices to nearly $55 per barrel, attributed largely to the destructive effects of Hurricane Ivan, left the price for delivery in 2010 barely above its August high. This suggests that part of the recent rise in spot prices is expected to wash out over the longer run."