Forget supply and demand, just record the index cards....
Source of picture: Heatusa.com
This amateur pundit is beginning to think he got it very wrong.
"I've been thinking the same thing - I was as gloomy as you a few months ago," said an oil-and-gas consultant friend of mine this morning.
"The Singapore property market is close to its all-time highs of 1997.
"The consumer-confidence indices have seen a complete about-turn from 12 months ago.
"Could the improved sentiment itself result in this being a U rather than a W-shaped recovery?"
"Maybe the Chinese government will continue spending as much as it can to stimulate the economy as a hedge against the US dollars.
"Why buy more Treasuries when dollar weakness seems to be a long-term factor with the risk that the dollar might also be replaced as the reserve currency?
"It could well be in China's longer-term interests to keep investing heavily in moving the economy from an export to a domestic focus.
"This will need to involve winding down policies that have provided temporary relief from the global crisis (i.e. huge increases in bank lending and other stimulus policies) in favour of reforms that will boost the pace of genuine, underlying consumption growth.
"These need to include better healthcare and pension systems, financial sector liberalisation and deregulation of distribution and logistics."
"It seems amazing that only a year ago we were talking about something as bad the Great Depression of the 1930s.
"Perhaps the problem is that we've been looking too much at fundamentals - at supply and demand from oil down to finished goods.
"The focus instead should perhaps have been on international capital flows.
"We need to more carefully study how money flows between borders and between different equitiy markets, commodity futures markets and over-the-counter (OTC) trading,"
Here are my views...
Electronic trading systems have revolutionised the speed of capital flows.
The IntercontinentalExchange website, for example, says that transactions on its wide and ever-expanding range of markets each take only two milliseconds.
You have dollar and oil markets sitting on the same exchange. Movements in both markets are presented in real time.
Has this contributed to the correlation between a weaker dollar and higher crude prices -along with the rise of index funds linking the two?
Energy prices have been virtually divorced from stock levels since 2003 and so recent historic-high storage of oil, refined products and natural gas is nothing new.
The current bull-run in crude might well last until real demand catches up.
It seems unlikely that interest rates will rise before then. The US government will want to avoid banks - which are benefiting from public fundingand less competition - in trouble again.
Ironic, isn't it? Bail-out money is being used to make more bets. The bigger the bets the less the risk for a financial institution.
And maybe even the speculators have done us a favour by pricing in future tight supply now.
An issue for chemicals companies is controlling their production and stock levels to reflect the genuine needs of their customers.
The task of separating market froth real and immediate demand would surely benefit from some harder thinking.