$70 Oil Menaces Budding Recovery

[Purveyor]

Source: CNN Money

June 9, 2009: 1:31 PM ET

NEW YORK (CNNMoney.com) -- Two weeks change a lot in the oil markets.

At the end of May CNNMoney.com ran a story asking if $60 oil will kill any economic recovery. 'No," most analysts said - consumers could shoulder $60 crude, and analysts didn't see prices going much higher.

Now oil is touching $70 a barrel. Goldman Sachs recently said it sees crude at $85 by the year's end. With the economy still on life support, oil is drifting dangerously close to being the wet blanket at the recovery's party.

Many say consumer spending - which accounts for over two thirds of the nation's economic activity - takes a big hit when crude hits $100 and gas $3 a gallon. Some say it's more like $125 crude and $4 gas. Others say that during a recession $80 is the breaking point.

But putting a number on it is almost beside the point. The higher it goes, the more it hurts.

Read more: http://money.cnn.com/2009/06/09/news/economy/oil_prices/index.htm?section=money_mostpopular

[liberal N proud]

1. It contributed to the recession in a big way

And now they are going to drive the price up and dive the country deeper into the depression.

[AndyA]

4. And where is Congress and Obama on this?

Oil is not in short supply right now. In fact, they've run out of places to store it!

Someone needs to identify who is manipulating the price...something tells me the parties responsible are also likely getting taxpayer bail out money, too. :mad:

[Enthusiast]

15. Oil was not in short supply

when it went to $147, either.

[frylock]

19. they'll get right on that..

in 2010 and 2012.

[DaLittle Kitty]

22. The Price Will Rise Until August of 20010 WHEN Its Time To Protect INCUMBENTS! Then...

There will be some off the wall reason postulated for gas prices dropping precipitously... Just in time for guess what... ELECTIONS! Happens every time! :think:

[SkyDaddy7]

9. I was wondering the same thing!

We need reform on the commodities market ASAP!!!

[phantom power]

2. For what it's worth...

This is exactly the behavior predicted by the Bumpy Plateau of Peak Oil. Last year, oil prices spiked. Hard. Not too long after that we get hit with an economic implosion. From here on out, every time the economy starts to expand, it will get its head cut off by a corresponding oil price spike.

Most human economic activities currently require oil, or one of its derivatives.

[GliderGuider]

20. Nobody's listening

Most people round these parts are invested in the idea that politics is the real show, and politicians are the ones in charge. So if something is going wrong, it simply has to be a manifestation of greed or political venality.

The idea that we're experiencing second order knock-on effects of hitting biophysical limits is hard for people to get their heads around, especially if they've been brought up to believe that Man has more power than Nature and that economics trumps physics.

[phantom power]

21. I think the point is made difficult by the multitude of other moving parts...

For example, there was speculation last year. I think it may have been overlooked that the speculators were correct, in addition to just being greedy. For another example, the economic implosion of last fall was clearly set up by rampant financial deregulation. But what was the eventual trigger? $140/bl oil and $4.50/gal gas ought to be on the table.

Now we have oil prices leading demand again, but why not? They're futures. It's an expression of economic optimism. I doubt that much optimism is warranted, but in the end I think the effect will be the same. Economic recovery will result in oil price spikes, which will limit economic recovery.

[DJ13]

3. nation's economic activity - takes a big hit when crude hits $100 and gas $3 a gallon

Theres the rub.

Gas is ALREADY at $3 per gallon, while the price of crude is less than half of its prior high at $69 per barrel.

The price of gas has decoupled from the price of crude.

At $100 oil the price of gas could conceivably be near the prior national record of nearly $4.50 per gallon at this rate.

[Andy823]

6. You beat me to it.

I couldn't agree more. It makes no sense for gas to be so high, $2.93 today in my town, when oil is only $69 per barrel! It's the greed of the gas companies once again, and congress is doing nothing to stop it. Last year congress said they would do work on stopping the price rise by speculators, but it looks like that was simply a talking point for the election cycle, and now wall street, and big oil are once again trying to screw the public so they can make huge profits!

Congress needs to get tough as hell on this issue, put tough regulations on buying oil and stock piling it, and then trying to manipulate the prices up! If the democrats in congress don't start working on things like this they risk losing seats next year. If they get off their butts, and start really working for the people of this country, we can "increase" seats. This issue, along with health care, should be rallying points for the democrats, and if they do something about these issues, they will benefit greatly in the next election. The only questions is will they?

[Enthusiast]

16. "Congress needs to get tough as hell on this issue"

LMAO! :rofl: :rofl: :rofl:

[xxqqqzme]

8. here in SoCal it is over $3/gal

[notesdev]

5. Dumb headline writing strikes again

Should read something more along the lines of "Devaluation of US dollar menaces nonexistent but we are paid to make you believe it is budding recovery".

Oil priced in dollars is going to go up or down on the value of the dollar. The currency movement is the cause, the commodity prices are the effect.

[Zynx]

7. Commodity prices and dollar movements are not always linked.

In 2000, the dollar rallied all year long and yet commodity prices went up by double digits. In 1985-1986, the dollar depreciated by 30% and yet commodity prices didn't budge.

Mathematical trading models have created a stronger linkage than has historically existed.

[notesdev]

11. Goes back to supply and demand

1985-6 were boom years, and consumption increased to support the price of commodities.

However, we are in a deflationary depression right now and consumption is dropping like a rock. Yet prices are still on the increase, only a small amount of which is due to dropping supply. This has to be accounted for with currency movement, and if you flip the dollar index on its head you will see a good representation of oil price movements.

[Zynx]

12. That doesn't make sense. If 1985 and 1986 were boom years, why did commodity prices

drop in the face of a 30% drop in the dollar? In 2000, with slowing economic growth and a rising dollar, commodity prices rose, largely driven by oil. The linkage is not very strong. Speculators are the largest component of the current movement.

[high density]

18. The dollar index to what?

The fluctuation in the value of the dollar (e.g. compared to the Euro) has been rather mild in comparison with the wild surge in crude oil over the past few months. A 10% loss in the dollar is not responsible for this.

[SpiralHawk]

10. "Smirk" - Republicon Homelander Fatcat Oil Cronies

[truthisfreedom]

13. It's over. We hit peak oil in the US in 1970. We're hitting peak oil overseas now.

From now on, every year, we extract less oil than the year before. It's unavoidable.

Of course the price will go up.

It will hit 1000 a barrel eventually.

We need to save it for plastics and our future.

We don't need to burn it.

[high density]

14. Are we going to have to deal with this shit every summer?

I want off this roller coaster of speculation. 2008 was more than enough craziness for a decade or two.

[nod factor]

17. Newsflash:

Obama wants higher gas prices. Hell both he and Kerry articulated such in both of their respective campaigns. Higher gas prices force conservation and discourages the buying of SUVs and what not. I don't necessarily agree with it but it's the band-aid rip and run policy. Even if it stings the time to get off oil is now.

[Historic NY]

23. SPECULATORS at it again along with Euros, Pounds & precious metals.

There is so much oil sitting out at sea because it can't make landfall due to a surplus.

http://tonto.eia.doe.gov/dnav/pet/pet_pri_gnd_a_epmr_pte_cpgal_w.htm

[quispquake]

24. Where is Obama on this???

Notice the date...

Obama unveils clampdown on oil speculators
Jun 22, 2008

WASHINGTON (AFP) — White House hopeful Barack Obama attacked energy speculators Sunday, outlining new regulatory proposals that his campaign said would slash record-high oil prices and help hard-pressed consumers.

The Democrat attacked the so-called Enron loophole, a 2000 deregulation of oversight by the Commodity Futures Trading Commission that critics say opened the way to a speculative free-for-all in the oil markets.

"For the past years, our energy policy in this country has been simply to let the special interests have their way -- opening up loopholes for the oil companies and speculators so that they could reap record profits while the rest of us pay four dollars a gallon," Obama said in a statement.

"My plan fully closes the Enron loophole and restores common-sense regulation as part of my broader plan to ease the burden for struggling families today while investing in a better future," the Illinois senator said.

http://afp.google.com/article/ALeqM5jNJjgKkHGZkk3FAyRTqcgpJx_kdw

[Historic NY]

27. Well he better get on it soon its up about $1.00 since Jan here.

[David__77]

25. Good for many developing countries.

No more stories about "Hugo Chavez's coffers drying up."

[hunter]

26. We're riding hell's roller coaster.

It's gonna be this way all the way to the bottom.

Hang on tight and scream all you want, ain't nothing going to bring back the easy oil. We burnt it all up on an economic joyride.