This morning Daniel Yergin, the famous energy analyst and Pulitzer Prize winning author of The Prize, stumbles into the very trap I warned of several days ago. Writing in The Wall Street Journal, Yergin attributes high oil prices mostly -- or even exclusively, as far as I can tell -- to political, weather, and technology disruptions around the world, the most recent being that company in Alaska with the Bad Pipes. Yergin even displays a chart of oil prices "Climbing the Wall of Worry," with the political and weather events superimposed. Trouble is, oil prices had tripled before any of these events happened. As I described in "The Elephant in the Barrel," these relatively mild supply and demand shocks account for a relatively modest portion of the elevated oil price -- maybe $10-$15. The more fundamental cause of high oil prices -- accounting for $30+ of the rise -- is a weak dollar policy at the Federal Reserve.
- Bret Swanson