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Phil Flynn, an analyst at Alaron Trading Corp., said London’s expectation that inflation will fall below its target of 2 percent next year plays into a strong dollar; when a country’s inflation rate falls, it is less likely to raise interest rates, a move that would support its currency against the dollar. Crude is bought and sold in dollars, and when the dollar rises against foreign currencies, investors often buy the greenback and sell oil.
Flynn said investors are adjusting to a new reality that involves a slowing global economy with a strong dollar, weak commodities and a fear of deflation, or a general decline in prices. They’re also grappling with the prospct that global growth next year will slow more than originally feared, cutting demand for gasoline and other crude products.
“We’re seeing a massive readjustment on a historic scale,” he said. “We’ve never gone through anything quite like this.”
# 20 Mister Mustard said, “18.31”
danke
# 29 soundwash said, “since it fiat money, they should have taken that $7trillion (or more)created from the $700bn borrowed to capitalize 10 new US Based banks run by Uncle Sam (and not the privately owned Federal Reserve bank) with complete open book oversight to congress *and* John Q. Public.”
Truth.
The nutcase conservatives are blaming Obama on this recession.
Can they at least CREDIT Obama for the lowering of gas prices?
John – I personally witnessed this on the IR side, but I ain’t talkin’… :X
Hmm…I wouldn’t blame BO for what’s happening now (it’s been in the works/been orchestrated/whatever for some time now), the only way he would shoulder any responsibility would be by taxing the country, acting more protectionist, etc. thus making the recession last even longer.
All this talk of price points for Middle Eastern countries reminds me of something funky I read:
http://www.aim.org/aim-column/obama-to-inherit-new-global-order-from-bush/
I read elsewhere about $80/barrel being the break even point for Saudi Arabia, funny that we’re looking for help from that quadrant. So while the Shiite side of jihad may get toned down a bit it won’t likely happen in the case of the Wahabists. They’ll still be supporting extremists elsewhere and have some extra leverage in the process after this ‘crisis’.
A modest over supply and the price falls into the crapper.
A modest under supply and the price is bid up to the stars.
The low prices are good in a way but this might shut down tar sand production in Canada and that is where we get much of our gasoline.
If that happens the supply and demand shake out may jar all of us.
“QB said, on November 12th, 2008 at 4:52 pm $40 is reasonable, much closer to historical prices if you count inflation. If oil hit the $20 range then a huge number of producing wells would trip automatically into shutdown”
This is alreddy happening in the illinios oil basin.
#37
They will still be pumping oil out of the oil sands. Even if the price goes below $30 USD.
Once you put millions of cap X into the projects. You have no choice but to pump oil at any price. The lower the price, the more you have to pump. You would hate to see the bank take over the project.
Oil was run up on the ICE exchange by US and UK hedge funds and investment banks.
The party ended quick in Aug and Sept and they dumped everything (selling oil, buying the dollar).
They still went bust on their big ideas of CDOs and CDSs.
I once predicted here that we would never see $2/gallon gas again.
“Prediction is very difficult, especially about the future.”
# 22 ECA said:
“Iv heard that a few locations have gas BELOW $2..in the USA..”
I expect to buy some today or tomorrow.
Let’s see. Detroit made money on those ‘8mpg’ cars, and hardly anything on the 30 mpg cars. Meanwhile Toyota and Honda made money on the fuel efficient cars, then they expanded their lineup into the bigger cars too, and made even more money.
The reason Detroit is losing money is because they are spending an extra $1500 per car on labor costs. Get rid of that, and their fuel efficient low-priced cars would be profitable too. Cost per hour for Detroit is over $70.
Just an added time-sensitive chuckle: Oil broke back over $70bbl today.
Har!