Crude oil has a $25 dollar premium built into the price - We are not making this up; it comes from IMF economist John Lipsky, quoted in a story today carried by Bloomberg:

“IMF research indicates that if the dollar hadn't fallen from 2002 to 2007, oil prices would be $25 a barrel lower. Crude oil futures surpassed $120 a barrel this week for the first time. Commodity prices excluding fuel would be 12 percent lower, Lipsky said.”

We are not sure about a $25 premium. But one thing has been true, we know the dollar has rallied in the last four of five recessions and we know the real price of crude oil has dropped a bunch during the last two recessions.

We define the real price of crude as the number of ounces of gold it requires to buy one barrel of crude oil. The peak real price of crude was in August of 2005, at around 0.15170 ounces of gold. The current real price of crude oil is 0.14023 ounces of gold per barrel.

Jack Crooks

Black Swan Capital LLC

http://www.blackswantrading.com/

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