FYI to people who are not paying attention: Oil may break over $100/per barrel today – it is trading around 99.75 – the funny thing, if refiners didn’t drop their spreads, we’d already be paying $4/gallon for gas. I’m glad I walk to work.
Here’s the problem – as we lower rates, the US dollar drops, making it more expensive to buy oil because we have to convert out dollars into the foreign currency of the producing nation (company) first, then buy the oil.
Oil is also rising due to tremendous demand, and temporarily, Napoleonito (Hugo Chavez) is causing problems with his comments. By the way, according to the Economist, the Venezuelan national oil company, that pays for all of his lavish social spending, is not operating at full production because he keeps draining the company to pay for his ridiculous programs. I guess buying votes works until the golden goose drops dead. I expect him to be either gone or 100% irrelevant within 12 months. if that happens maybe oil market tensions will calm temporarily but it won’t matter long term.
Oil prices are high because of:
1. High demand – did you see the stories that increasing numbers of Chinese like going for drives through the countryside on their new highways?
2. Falling Dollar – why do you think gold is $930/ounce? it was $250 or so 6 years ago. When our dollar drops, it makes imports (including oil) more expensive
3. Serious lack of new supply – it takes a long time to find and develop an oil deposit – we’re so far behind…
Say hello to $4-5/gallon gas! And instead of complaining about oil company evil schemes, why not try investing in them and let your dividends pay for your gas? no forget it, go buy another flat screen TV instead – spend spend spend!
PS I am not recommending you invest in anything -do your own research; that was just me being my usual sarcastic self.
PPS . while I was writing this, oil popped above $100 before settling $99.54