Crude awakening

Today

Oil volatility inflicts punishment at large. On a macro level economies suffer, as rising crude costs act like a tax, crimping growth. Higher fuel costs spur inflation, afflicting many inputs, manufacturing and distribution. Consumers wince when they fill up their cars, or heating oil tanks for their homes, and translate that pain into lower overall consumption, which feeds back into the larger economy. Sectors that bear the worst brunt, like airlines or truckers, cannot hedge indefinitely.

It is remarkable how swiftly even 30-days-out futures prices show up in wholesale markets. Notoriously, after Hurricane Katrina struck in 2006, among the 1200 wholesale petrol and diesel terminals in America, 90% of them rose by 50 cents within 48 hours.