Housing Bubble Bursting?

[Randolph Kinney]

A common denominator to all economies is energy. The higher the standard of living (consumption of anything, goods, services, whatever), the more energy is consumed. For economies that are pegged to the dollar, a way to maintain that standard of living is to switch currencies.

Otherwise, your ability to consume takes a hit as the dollar falls in value.

One other way to disguise the problem is to raise taxes on energy consumption (in the name of global warming) or taxes on consumption in general. Yes, that's the ticket! It won't matter if you conserve or find new sources or substitute cheap labor.

 

[Riick]

I think you meant 0.65 euro. 65 euro is equal to $94

65 euros is exactly what I meant.
If you were living in one of the EU nations, you would NOT have noticed as high of an increase in fuel prices, as increase in # of euros per barrel has not been as great.

Kapish ???

If not have a look at this chart
... and try changing time period to 2yrs

http://www.advfn.com/p.php?pid=qkchart&symbol=FX^USDEUR

 

[KenRossman]

Except they are already paying much more than we do, regardless of exchange rates, due to drastically higher taxes...

http://www.eia.doe.gov/emeu/international/gas1.html

 

[Riick]

Except they are already paying much more than we do, regardless of exchange rates, due to drastically higher taxes...

http://www.eia.doe.gov/emeu/international/gas1.html

Yes they pay more, but their taxes on fuel have noting to do with
the change in the cost of an import due to a depreciating currency - Such as the US Dollar.

(( It now takes about $1.45 to buy a euro. Ouch! Shortly after the euro started life(in 1998) it was as low as 88 cents. ))

 

[KenRossman]

So since the beginning of 2007, an 8.7% decrease in the value of the dollar vs. the euro is responsible for a 50% increase in crude oil prices?

 

[Terrel L. Shields]

All that money that fueled the tech and housing bubble is now flowing into commodities speculation. They are betting on a disruption of the oil flow ... the speculators are blowing bubbles. It works every time. Heads we win; tails you lose.

Hedging has become the equivalent of cornering a commodity market. Hedge funds in NY and many in Conneticut are short selling oil and pumping it at the same time. The Middle Eastern Risk premium is about $10 - 15/bbl. Oil is 6 - 8 times more valuable than natural gas. Almost all natural gas is U. S. produced. Very little oil comes from here. Gas is $7per MCF. 7 x 8 = $56 plus war premium of 15 = $71. Its $93 a bbl. $22 per bbl can be attributed to speculation by U. S. led hedge funds. Exxon is not controling the price of oil. OPEC is not controlling the price of oil. Wall Street is.

 

[Riick]

So since the beginning of 2007, an 8.7% decrease in the value of the dollar vs. the euro is responsible for a 50% increase in crude oil prices?

I repeat myself - with emphasis:

"If you were living in one of the EU nations, you would NOT have noticed as high of an increase in fuel prices, as increase in # of euros per barrel has not been as great."

-- and THANK YOU Mr. Shields for the analysis!

 

[KenRossman]

re-read your post 4528...

 

[Riick]

My policy - when you're wrong, admit it, I overstated my case.

Between 1/8/07 and 10/29/07 oil went up 67% in terms of Dollars
and 51% in terms of Euros, a difference of only 16%.

01/08/07 Oil $56.08 -or- € 43.06
10/29/07 Oil $93.45 -or- € 64.87

 

[Randolph Kinney]

Hedging has become the equivalent of cornering a commodity market. Hedge funds in NY and many in Conneticut are short selling oil and pumping it at the same time. The Middle Eastern Risk premium is about $10 - 15/bbl. Oil is 6 - 8 times more valuable than natural gas. Almost all natural gas is U. S. produced. Very little oil comes from here. Gas is $7per MCF. 7 x 8 = $56 plus war premium of 15 = $71. Its $93 a bbl. $22 per bbl can be attributed to speculation by U. S. led hedge funds. Exxon is not controling the price of oil. OPEC is not controlling the price of oil. Wall Street is.

Terrel,

That is a good analysis of what is driving the price of oil and how it relates to natural gas.

On the inflation front, the price of oil as a percent of GDP for the US has declined since the late 70', early 80's. At $95 per barrel today, we are roughly at the same percentage of GDP as when the peak hit last, roughly 7%. I am sure we have greater efficiencies in using oil since then and we have substituted alternative forms of energy. However, we have more and more of our GDP made from services than ever before (almost 70%).

Economies that have oil as a higher percentages of GDP will be more impacted by price increases of oil than the US. Take for example China.

To generate every US$1 of GDP, China uses three times or more as much energy as the global average, 4.7 times higher than in the U.S., 7.7 times higher than in Germany and 11.5 times higher than in Japan.

It would seem that the price of oil is going to impact more so on China than the US.