History is a great teacher about things that are happening right now. That is why NASA researchers just sent up an incredibly expensive telescope that they hope will give them a glimpse of history all the way back to the Big Bang.
They believe — and I agree with them — that peering far into the past will help them to understand better the laws of physics that affect our lives right now.
But no matter how much economic history I study, I still have to grapple with the "hard right edge" of a chart. That's the line on the graph where history ends. All of the lines and curves and numbers to the left already happened, and all of the blank open space to the right represents the future.
No matter how hard I study the data and stare at the graph, the lines I imagine or draw beyond the hard right edge are conjecture. They are opinions or conclusions formed on the basis of incomplete information.
With that introduction, I offer for your consideration a chart comparing the price of crude oil to my Resins Price Index. Regular readers will recognize this chart from columns past, but I am certain you share my opinion that it never grows old.
As always, there are two crucial points to this chart. First, the intermediate and long-term trend in the price of plastic resins tends to follow the trend, with a lag, in the price of crude oil. As you can see, the price movement in the crude oil market is more volatile than the price movement in resins. So resin prices do not follow every wrinkle in the oil market. But, over time, the correlation is quite robust.
The second point is that crude oil prices are rising briskly at the present time. It appeared to me that the price of oil hit a peak in the fourth quarter of last year, and this peak seemed to be confirmed by the fact that resin prices started to roll over shortly thereafter.