Chart of the Day - Monday 11th August 2008

We're in the middle of an interesting few weeks in the Australian oil market, so it's worth capturing these charts of international and regional oil prices from the Australian Institute of Petroleum for posterity.

The US dollar oil price has fallen 23% from its peak, but the Australian dollar dive of the last fortnight means we're not seeing all of that drop. The price of oil in Australian dollars fell 13% but has since then been essentially flat for more than two weeks despite the continuing fall in US oil prices. For a long time now the strengthening aussie dollar has shielded us from increasing oil prices, but that trend is no longer acting in our favour.

Guess we've been the lucky country up until now, with our commodity oriented currency following the commodity markets up and down.

Hopefully we don't find ourselves with a general commodity price collapse and a rising oil price post peak - that would be unfortunate....

I think Australian's luck is going to run out before their complacency does.
I can't see the commodity boom continuing much longer.They are by nature,cyclic, but there are other factors in operation now which are going to put the kybosh on it-generalized economic meltdown plus geopolitical shenanigans to name but two.

Unfortunately,through many years of mismanagement,Australia has a much reduced secondary industry,an agricultural industry in a rundown state and a monumental balance of payments deficiency/national debt.
The national mortgage is about to be foreclosed and the credit card stopped.

Sorry to be a bit of a doomer.I was born an optimist but many years of experience and observation have made me sceptical,even cynical, about the people who would lead(exploit) this country.

Question Everything.

Much of the dollar weakness has been in anticipation of the RBA commencing a lowering cycle ofinterest rates. Exporters generally and manufacturers in particular will welcome some dollar relief. If it increases our oil price and pushes the price back up at the pump, that can only be a good thing to maintain some of the behavioural changes that are just creeping in.

Public transport being packed to the rafters is getting the politicians attention, although they don't know what todo about it. Qantas is downsizing and restructuring; suburban sprawl development and McMansion building has all but stalled. The lower dollar will punish retailers like Harvey Norman but who cares what happens to those bloodsuckers.

It will be very interesting indeed to see what happens to the Aussie when oil reverts to it's inevitable rising trend. I wouldn't call the minerals boom over just yet though. The Chinese still have an awful lot of ambition to fulfil and they are not the only Asian country hell bent on modernising. That is going to take an awful lot of coal, iron ore and copper along with all the food that will be in demand. You coul do a lot worse than to live in Australia right now.