INVESTORS! WATCH OUT FOR THE PRICE OF OIL!
Oil prices rise on holiday sales, Europe hopes
By CHRIS KAHN, from Bloomberg
Oil prices climbed Monday after shoppers pumped up holiday retail sales in the U.S., and investors bet that Europe would find a last-minute solution to its financial crisis.
The U.S. crude benchmark rose $1.60 to $98.37 per barrel in New York. Brent crude, which is used to price foreign oil varieties including many imported by U.S. refineries, rose $1.82 to $107.58 a barrel in London.
Benchmark oil has recovered much of the ground it lost since Nov. 16, when it hit $102.59 a barrel. Prices rebounded Monday following strong holiday sales in the U.S, where shoppers spent nearly $1 billion more on Black Friday than they did a year ago.
“The U.S. is probably doing better than we gave it credit for,” PFGBest analyst Phil Flynn said. “Consumers are buying more, and that’s going to get manufacturers to produce more products, and it’ll take more energy to make and distribute those goods.”
Meanwhile European leaders are considering new solutions to their credit problems, with little time to left to preserve the euro currency. Among the ideas is a plan for eurozone countries with the best credit to pool their resources to assist the most indebted members of the 17-nation currency block. The International Monetary Fund also denied rumors that it’s planning a bailout fund for Italy, which is among the countries with big debt woes.
Some analysts say the euro could collapse in days, unless action is taken.
At the gas pump, prices fell less than a penny to a national average of $3.295 a gallon in the U.S., according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is about 15 cents cheaper than it was a month ago, but it’s still more than 43 cents higher than a year ago.
Dr. Pinna says:
There are two reasons for the price of oil to rise: Supply and Demand.
This article is concentrating on Demand. Business is picking up and energy is needed to make and deliver goods. But, the Supply side is also changing.
Iran, a major supplier, is seeing its nuclear facilities and its rocket bases, hit by US and Israeli sabotage. The Iranians are beginning to reduce their oil output as a measure of defense. When they did this in the 1970′s panic ensued in the U.S.
Here is a clip taken from Oracle which reminds us of what happened:
“The Mideast Oil Crisis”
“In October, 1973, panic gripped the United States. The crude oil-rich Middle-Eastern countries had cut off exports of petroleum to Western nations as punishment for their involvement in recent Arab-Israeli conflicts. Although the oil embargo would not ordinarily have made a tremendous impact on the US, panicking investors and oil companies caused a gigantic surge in oil prices. The situation, caused more by fear and irrationality than any firm economic basis, turned out to be one of the most memorable of the 1970s. Those who can remember the so-called “Mideast oil crisis” also remember long lines at the gas pump due to petroleum shortages and high gasoline prices.”
Will we see this again? If the West does enough damage to Iran we will see a definite boost in the oil price. That will lower the purchasing power of the West and exacerbate the recession.
The purchasing power of a country makes or breaks an economy.
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