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CNNMoney reports that oil closed up a record $11 a barrel today -- closing at $138. Can $200 a barrel be far off?
As I posted, this record price spike could have something to do with speculators' fear that they will no longer be able to take advantage of the swaps loophole the gives them unlimited ability to control the oil market. Perhaps rumors that regulators will close the loophole are scaring speculators to buy up as much oil as they can before the loophole closes.
Or it could be a plunge in the dollar. As I posted, the European central banks are talking about raising interest rates further to fight inflation. But the Fed is only talking about inflation and not doing anything about it. The dollar has lost 70% of its value since January 2001. With oil trading in dollars, it's taking more and more of them to buy a barrel of oil.
Don't expect the government to help. Do you have any idea how much more money a rise in oil prices helps enrich Dick Cheney? His Halliburton Company (NYSE: HAL) shares alone are up 150% since January 2001 during which time the price of oil has risen 475%. No reason to stop that gravy train rolling.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Halliburton.
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Reader Comments (Page 1 of 1)
6-06-2008 @ 5:07PM
Ryan said...
If you were so confident Cheney would be enriching himself with Halliburton, why didn't you buy Halliburton eight years ago? To say he's enriched himself with "his" company Halliburton
implies you know what his stake is in the company or how many shares he owns. Why don't you tell us. As to the 70% drop in the value of the Dollar since 2001....my house doesn't cost 70% more in dollars to buy as it did in 2001. Maybe I should be teaching mgt at Babson College. I did invest heavily in oil eight years ago!
6-06-2008 @ 5:32PM
vicgar said...
this bubble will bust just like real state and.coms
6-06-2008 @ 7:06PM
Alnusw said...
Never seeming to run-out of excuses for what is nothing more than run-away commodity market speculation, we are told that even though demand is running lower here, it is still running high in China. But consider this: China's new-found prosperity is a result of new factory jobs making stuff to sell to folks in the U.S.. As oil prices cause our economy to falter and as our dollar drops, we buy less and less from China, meaning their economy starts to suffer and all those workers with their new-found prosperity get laid-off and go from cars back to bicycles. What does that do to the "Demand" argument? I wouldn't bet on oil futures too much longer.
6-06-2008 @ 8:27PM
william lindblad said...
It is a bubble that will burst - but not before it cripples the economy. Adam Smith would be proud - greed in action.
6-07-2008 @ 7:41AM
john said...
Is anyone that naive to believe Bush and Cheney are not prospering at the stake of all of us? Do we still believe this country is for the people by the people?