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Question: So, Which Is It, Recession or Speculation?
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Citing over-production, OPEC says production will be cut by 520,000 barrels a day over a 40-day period. The oil-rich nations are doing so because of a dramatic and fast slackening in demand for oil, which begs the question: is speculation egging them on, or is the whiff of a deep global recession in the air?
On the ground, the announcement likely halts the precipitous drop in oil prices for now, with brent crude having dipped below $100 days ago. You day-traders will note that in New York, expectations for October pegged light crude at $103.34 a barrel, still much lower than the $147 seen in July.
With oil prices rising and quickly falling so dramatically in only three months, two factors are in play. Speculation on the price of oil definitively caused a big portion of the run-up in prices this summer. To some extent, we are all simply at the whim of market speculators and investors. It's the second possibility that's more worrying and less easy to fix quickly: as suggested by Goldman Sachs earlier this week, we might be in a global recession if we ever see prices below $100 a barrel--oil prices being a bellwether for reduced demand.
There is no doubt that worldwide oil demand has shrunk recently and quickly. Economic hardships aren't unique to North America, though our huge dependence upon fossil fuels and our long history of cheap oil has led us to a pretty tough fall, only compounded by the sub-prime mortage crisis. We're not alone: Britain's worrying over recession, and even some Asian tigers are looking at flat or slight growth in the months ahead.
Tell us what you think -- are we headed for a correction or a full-blown recession, based on oil prices? Was the recent gas price surge just a fluke? Is it time to buy a dirt-cheap SUV with huge rebates while the getting is good? Or are hybrids, fuel-sipping diesels, and hydrogen vehicle development here to stay? Give us your thoughts, and while you're mulling it over, flash back to our call for six ways to cut gas prices forever.--Colin Mathews
Source: BBC NEWS
On the ground, the announcement likely halts the precipitous drop in oil prices for now, with brent crude having dipped below $100 days ago. You day-traders will note that in New York, expectations for October pegged light crude at $103.34 a barrel, still much lower than the $147 seen in July.
With oil prices rising and quickly falling so dramatically in only three months, two factors are in play. Speculation on the price of oil definitively caused a big portion of the run-up in prices this summer. To some extent, we are all simply at the whim of market speculators and investors. It's the second possibility that's more worrying and less easy to fix quickly: as suggested by Goldman Sachs earlier this week, we might be in a global recession if we ever see prices below $100 a barrel--oil prices being a bellwether for reduced demand.
There is no doubt that worldwide oil demand has shrunk recently and quickly. Economic hardships aren't unique to North America, though our huge dependence upon fossil fuels and our long history of cheap oil has led us to a pretty tough fall, only compounded by the sub-prime mortage crisis. We're not alone: Britain's worrying over recession, and even some Asian tigers are looking at flat or slight growth in the months ahead.
Tell us what you think -- are we headed for a correction or a full-blown recession, based on oil prices? Was the recent gas price surge just a fluke? Is it time to buy a dirt-cheap SUV with huge rebates while the getting is good? Or are hybrids, fuel-sipping diesels, and hydrogen vehicle development here to stay? Give us your thoughts, and while you're mulling it over, flash back to our call for six ways to cut gas prices forever.--Colin Mathews
Source: BBC NEWS
Responses (10 total)
By RVB | Posted: Sep 15th 2008, 04:46:45 PM
Quick, people, start buying up oil!!!....
By JKD | Posted: Sep 12th 2008, 02:22:36 PM
Oil is a global market, people - Most of our supplies come from NAFTA partners, Mexico and Canada. You can't tax specific deliveries or single-handedly control its supply or demand beyond invading Saudi Arabia like we should have done in 2001. Using what we produce (with drilling or without) and tapping into coal, wind and solar to make up the difference is the only way to become independent. Otherwise, the sheiks and communists will continue to own and dictate the "American way".
By JKD | Posted: Sep 12th 2008, 02:16:46 PM
Once again, no - our reserves are not even close to what Saudi Arabia has. They're also 10 times harder and much more expensive to get to. I'm for drilling, especially offshore IF financed by the companies themselves and not my tax dollars like it's been done so far. But the people need to start conserving or we'll perish in our own shyet.
By Tom L | Posted: Sep 12th 2008, 02:13:56 PM
People have a right to buy and tow a trailer, SUV, ect. they just don't have the RIGHT to afford it. They have to earn that. If we want to wean our dependence on foreign oil then we should only drill if we also Tarrif imported oil (especially from OPEC). Otherwise we'll just keep increasing consumption and continue to rely on imported oil. And for the record I would like to point out that I'm not for tarrifs, I'd prefer the Feds slash income taxes and replace them with consumption taxes but that's not happening anytime soon.
By Dave | Posted: Sep 12th 2008, 01:24:24 PM
"They dont have to"
Well the should be able to this is after all AMERICA!!! People will and should be able to tow campers, race car trailers etc unless we turn this into the greater republic of america! Again what should we do let it sit there when we have just as much reserves as Saudi Arabia! We can and should drill and also go after biodiesel, wind,etc. Any thing else is sheer ignorance. We have the know how to go after it so it will not ruin the enviroment. Why be dependent on other countrys for oil
By odineye | Posted: Sep 12th 2008, 02:52:39 AM
"People still have to tow campers..."
No they don't *have to*. We've chosen to live that way largely because cheap oil made it possible. Tents and cabins on site easily replace trailered campers. Trucks for shipping, construction and similar work can be operated on biodiesel.
Drilling for oil here simply delays the inevitable and slows the process of growth and adjustment that our economy and society clearly needs to make. It's bad for the environment, bad for us, a bad idea all around.
By Dave | Posted: Sep 11th 2008, 09:24:25 PM
Its been proven that we would see the oil alot sooner that 8 years and prices would drop even if we say yes we are going to start to drill for oir oil. Also why cant we start using more fuel efficiant cars like a Volt or Corolla and still drill for oil? What should we do just let the oil sit there? We will never get totaly away from trucks and suv's. People still have to tow campers, trailers and need them for there jobs.
By JKD | Posted: Sep 11th 2008, 05:58:40 PM
What's stupid is seeing a Navigator with the sticker "Drill for oil in the US!" on the road the other day. We import 60% of our oil and we constantly need more. I'm not sure if you'll get it now but you can start drilling today and that oil will not start trickling in for another 8 years and it will not increase our production by more than 20% and it will not satisfy our needs and it will not be cheaper to obtain than just buying the light crude from Saudi Arabia or the heavy stuff from Russia or Venezuala. If oil prices go down if supply increases, India and China will just use more of it - basic supply and demand. Selling that f-up Navigator and buying the Volt, a Corolla or taking a bus once in a while would have an immediate impact. Cutting our usage by 60% would make everyone happy and the country prosperous. Heck, we could even export our oil like we used to. Brazil did what they had to in 20 years and is an net exporter now - Why can't we?
By Dave | Posted: Sep 11th 2008, 05:41:26 PM
This just showes that we need to go get the oil that we have here and by our shores. We have the oil why not use it!!! Why should we depend on other countrys for oil when we have just as much if not more here. It is just sheer ignorance that we dont go get it and at the same time invest in other rescources (wind,solar,etc) If we get the oil it will have no impact on the enviroment either! Just total stupidity why we dont get it!
By JKD | Posted: Sep 11th 2008, 02:33:10 PM
Goldman Sachs predicted $250 just recently, so those clowns don't matter. $70 would probably be a sweet spot but it stills puts way too much money into Russia's pocket :-( That price would still make it worth expanding into alternatives and limit our oil spending (at ~$2.50/gallon it will not be cheap to drive a SUV but it won't shut the economy down either)
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