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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerNot so, says one energy trader. "Oil can be a factor in righting the markets and the U.S. economy," Energy Trader Jim Dietz told BloggingStocks Monday afternoon.
How so? "A substantially lower oil price will increase disposable income, help put a lid on rising business costs for transportation and heating, and lower the U.S. trade deficit. These are all good things, shots in the arm for the U.S. economy," Dietz said. "And right now we'll take any shot in the arm we can get." Dietz added that he was currently short oil, with a monthly contract.
Oil Monday afternoon was down $4.25 to $96.93 per barrel, continuing a two-month trend of lower oil prices. Oil hit a record high of $147.27 per barrel in July 12.
Dietz said uncertainty regarding the shape and regulatory framework of the new financial order underscores the importance of lower oil prices in the quarters ahead. "There are so many business operational unknowns now that knowing at least what your energy costs will be will provide some guidance for companies and for individual consumers," Dietz said. " I think the Saudis [OPEC member Saudi Arabia] fully understand this now and they're going to do their best to remove oil as yet another stress the developed world has to deal with. The Saudis know what will happen to the global economy now if oil starts heading above $110 again."
As a result, Dietz expects the Saudis to continue to pump 500,000-600,000 more barrels per day than their quota, or about 9.7 million barrels per day. That extra production, combined with slightly higher production by selected other OPEC members, plus reduced demand due to the global economic slowdown, "should help oil prices fall to the $80-90 range by the end of the year."
Oil / Economic Analysis: Investors/readers should not expect a lower oil price to create economic miracles, but all other factors being equal, $80 oil price beats $140 oil any day of the week.
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Reader Comments (Page 1 of 1)
9-15-2008 @ 4:07PM
andyg8180 said...
Funny... Still havnt seen any of this reflected at the pumps... I understand food is still up to recoup their losses.. But what losses do the oil companies have to make up??
oh, instead of $2 billion in Rev this month, they SHOULD have had $4... I understand now... Go me!
9-15-2008 @ 4:26PM
Shawn said...
It doesn't matter what the Saudis pump if the companies that run our refineries don't start showing a little compassion for the common man. Why were refineries running at 78% capacity before the last two canes hit? GREED. They should have been at max cap to generate some inventory ahead of these storms, in effort to stem the gouging we are seeing now.
9-15-2008 @ 7:44PM
william lindblad said...
Joe, are you and I in the same country?
Yes - oil dropped, but it is in OCTOBER contracts. The reality is that Gas and Diesel spiked up as much as 1.00+ per gal due to speculation of damage from IKE. That is on top of 3.50+ avg. prices. Just how the hell does this help the consumer? It took weeks for the recent drop from the 130 mark to evidence itself at the pump and most stations were still selling at 80+ cents over wholesale. The price will not come down until December. Bad enough it was the oil companies, now it is the station owners. Every greedy SOB is out to screw the consumer.
9-16-2008 @ 10:50AM
OhioHottie said...
It always amazes me how quick they are to raise the price of gas but so slow to lower it. If theres a hint of oil increasing in price.. BOOM.. its reflected at the pumps.. yet when oil price lowers.. takes a while for that to reflect at the pump.. and their explanation? "We need to sell the gas that was bought at the higher prices" Well what about the gas that was bought at lower prices?? Its all a scam people.. they don't give a crap about any of us!!