Actually, I would have to say that there IS an end to high oil prices. And, it is probably going to come sooner than you think.
Today, April 17th, we set a “new record” at about 115 bucks.
Makes 90 dollar oil seem pretty flamin’ cheap if you know what I mean.
But, let us consider a few things here. First, you have the once mighty US dollar on less stable ground than the 35W bridge in Minneapolis. The US dollar has lost a ton of value. The Canadian dollar is the closest in value to the US dollar it has ever been. The Euro is also gaining ground on the US dollar; I’m not sure what it trades at now, but it may even be worth MORE than the US dollar.
So, because the US dollar is worth less (and probably not far from being worthless), we have to pay more per barrel, to meet the price and value someone using, say the Euro is willing to pay. There was some talk a couple weeks ago about possibly switching the overall trading currency for oil.
There is also some limited refinery capacity as well, which I have heard there is some new stuff coming online in the next couple months, so refining capacity will expand, thus more oil can be made.
Here is the problem that oil prices are causing. Stock traders and consumers alike should take heed to this one. Wall Street is basically creating a bubble right now as far as oil prices are concerned; and at some point, the bubble will burst. The Feds did that a few years ago, by lowering interest rates to an ungodly percentage – the problem was, people that really should not have been buying, did buy because of the low interest rates.
The bubble has burst, and we are in a tremendous mortgage crisis. Housing sales are down substantially.
So, just like the housing market, it only seems logical that the oil bubble will soon burst. And, like people, the bigger it is, the harder it will burst. Mixed metaphor there, but you get the idea.
At some point, I fear that Wall Street will suffer, because more money is going to oil, and everything else will suffer. Thus, would that not create a stock market crash? We really don’t need that right now.
Here’s what I don’t understand. Because of oil prices being so gut-wrenchingly high, finally, for seemingly the first time, consumer demand for the stuff in the US is starting to show signs of decline. I read reports on Google News all the time about how consumer demand in this country is starting to wane.
But, wait a minute – did not OPEC just a couple weeks ago blame the US for using too much oil? By God, they blamed the oil price problem on us! But, if consumer demand here is showing a decline, why the price increase? And, really, I also do not understand how China can be blamed for being a huge oil consumer. Yes, I know oil makes the industry world go ’round; but I remember hearing a number once, saying that 1 in 70 people in China drive a car.
Does that seem to make sense to you?
Whether you want to believe them or not. Whether or not they are just shooting the breeze, even the oil powers that be are saying that the main problem is speculation in the market. You have these so-called “economic experts” saying, almost wishing, that the price of oil goes up!
“We’re gonna see $4 gas by summer,” some said. Other said we’d see it by early spring. Others have said that the price per barrel could reach $150 soon. It’s all speculation. But, the bozos on Wall Street don’t seem to think so. They want to match the speculation. I tell you, get rid of speculation, watch the high oil prices go down.
I’m going to take the optimist view, and say that I think the oil price situation will soon adjust itself. I think we will be paying much less in the coming months. As demand continues to decline, people put the boats, RV’s and ATV’s in storage for a while, drivers of the ever-so-cursed Hummers realize they really are getting no bang for their buck, I think we will see a correction in oil prices.
And, really, oil prices go up and down alot. Back in the 1970’s we had a couple of these really bad oil times, that back then, was just as much a pinch to the wallet as it is now. But, the price dropped. Big time. In the 1990’s, a recession in Asia caused the ppb to fall to around 20 bucks. And, if you remember, at one point, we paid about 89 cents a gallon.
So, I do think we are in for a major oil price turnaround. It’ll get better.
In the meantime, and I’ve quoted it before, if you’re feeling the pinch, “buy a smaller-ass car.”