ZH: Kolanovic: Oil is actually very cheap... here's why

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ZERO HEDGE writes:

Listening to Biden’s press conference this afternoon discussing soaring gas prices and relentless inflation (Biden prudently pivoted by instead praising the surge in small business creation as if it has anything to do with vibrancy, while completely omitting that it was driven by millions hoping to take advantage of the next PPP bailouts when the US enters lockdowns next), which had soundbites such as this:

– *BIDEN: GOING TO GET THROUGH THIS GASOLINE PRICE SPIKE

– *BIDEN: CHINA MAY DO MORE ON OIL RESERVE RELEASE AS WELL

– *BIDEN: UNACCEPTABLE FOR GASOLINE FIRMS TO POCKET GAINS

– *BIDEN: WILL DO WHAT’S NEEDED TO REDUCE PRICES AT THE PUMP

… one would think that the US is facing nothing short of a 1970s energy crisis (one where communist China is advising the Biden admin on how to best punish evil US energy companies for daring to “pocket gains” — maybe the US should just nationalize them like every other model communist nation) instead of just a collapse in the polls for Democrats ahead of next year’s midterms.

Truthiness aside, Biden’s comments do bring up a relevant question: just how expensive is oil… or rather how cheap?

Conveniently, overnight JPM’s Marko Kolanovic answered this question writing that “recently there has been a debate on how cheap or expensive recent oil prices are” particularly in the context of “several countries considering releasing strategic reserves in order to lower oil prices, and OPEC+ is considering how to respond.”

But was today’s SPR release – which is reserved for truly emergency situations – actually required?

In his analysis, Kolanovic presents one way to assess the cheapness or richness of oil prices, “namely by looking at the historical ratio to other asset classes”…

To read the full post, please click here.

Now read: “Wall Street Analysts React To Biden’s Not-So-Strategic Petroleum Reserve Release“.