At least it is transparently absurd.

From Megan McArdle…..

If you want to know just how ridiculous our agricultural programs are, consider this: for about half a century, we priced milk based on how far the cow was from Eau Claire, Wisconsin. No, I swear, I am not making this up. Apparently, the USDA scientifically determined that Eau Claire was the perfectest place in the entire world to keep cows, and that therefore the farther you were from that fabled city, the harder you must find it to produce milk.

Interesting Comments On Oil Prices

Macro Man put up a post arguing that oil prices had risen to far to fast to be justified by the fundamentals. In response, someone calling themselves Moe Gamble said….

Oil started to go into a trading range on April 23. Saudi Arabia was bringing on 300,000 barrels a day, and the price would have stabilized for a couple of months.

What happened is that we had strikes in the UK and Nigeria that took roughly 380,000 barrels a day out of May supply. To make matters worse, this lack of supply was not spread smoothly through the month. It was bunched up into a couple of weeks, and the effect of those weeks just started to hit. Traders had to pull off shorts and the price zoomed up.

Also, it turned out that Saudi Arabia had lied about when those extra 300,000 barrels a day were coming online. They had announced to the press that production had started the third week of April. Now it looks like the new production really didn’t come online for another 2-3 weeks (if then).

Prices would normally come down in a few weeks as this production started returning to the inventory reports. But you can kiss that good-bye because we have a special situation right now–China and India have been holding off on purchases, and a flood of new demand will be hitting when they get their act together in the next week or two. India: China:

This has been China’s normal cycle for at least the past year. Foot-dragging then massive buying when the diesel runs out. And now they are burning diesel in power plants to make up for a lack of coal related to the earthquake.

Meanwhile, Russia’s exports are off 3.3% from last year, and existing production has a decline rate somewhere between 4.5% and 8% (and rising).

That started off a back and forth discussion that was very interesting. You should read the whole thread.