With Rising Oil Prices, Get Ready for a Commodity Rollercoaster

With oil prices spiking to new highs today thanks to BP's pipeline debacle in Alaska, it looks like the long hot-summer of high prices is going to remain. And things aren't getting any better. According to the Bloomberg story, "Oil has risen 25 percent in New York this year on concern that faltering supply to the U.S., the world's largest energy consumer, won't keep up with rising demand. Militant attacks have slashed output in Nigeria, Africa's largest producer, by about one-third. Production from Mexico's Cantarell field, one of the world's largest, will fall 8 percent this year." On top of this, consider that we've not even entered the US hurricane season yet (not to mention the situation in the nuclear-fused timebomb that is Iran -- and the rest of the Middle East, for that matter).

In my view, the rise in oil prices will certainly cascade to the plastics and resins market in the coming months. Stay tuned, as the oil situation promises to present a commodity rollercoaster. Those organizations who have successfully hedged their supply costs and / or implemented risk management strategies will be the only ones patting themselves in the back in this coming market. Unless things change fast, this is going to get nasty.

Jason Busch

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