Badger Blog Alliance

Sic Semper Tyrannis

Friday, June 06, 2008

Free gas coming soon!

Or so you'd think by Fortune's Shawn Tully: "Why oil prices will tank: Arguments that $4-a-gallon gas (or even higher) is here to stay are dead wrong. Housing's boom-and-bust cycle tells you why."

Gee, need I say more? Shawn's got it all figured out. Based on one (albeit significant) vector that has nothing to do with silly realities like supply and demand, the weakened dollar - it's all about equilibrium pricing and the cost of production being out of whack.

I'm not buying it. Part of his argument is that, while the price per barrel is set based on the cost of production, many places aren't really paying that price! Proven by contorted logic only a Bear Stearns analyst could love.

He fails to demonstrate how production will rise and demand will slack, and his analogy of the housing market is apples to oranges. People don't need new houses; they will need more gas for their car. Housing may be a commodity, but there are alternatives (like living in your grandma's garage, like Lance does).