Why oil prices will tank

[ZoomZoom Diva]

Now, let's not combine that. There are a lot of political tensions in Nigeria that have nothing to do with the war in Iraq, and in other areas of the world as well. I'm not saying Iraq has no influence on the price, but that was already included years ago.

 

[YSOSLO]

Weak dollar is a legitimate reason, but most people fail to recognize that the reason the dollar is wea now, is because of the shocking increase in our national debt over the last 6 years. I know a lot of people get pissed off at Democrats because they're known as the "tax and spend" party, however the alternative of spending while either not raising taxes or even lowering them means greater national debt. And while I understand the typical Republican platform is the intention of reducing spending and lowering taxes at the same time, this most recent administration has managed to attempt to lower taxes a couple of times while INcreasing spending to an UNFATHOMABLE level which has caused our National Debt to skyrocket, which in turn makes our dollar worth diddly-squat in the World economy.

To make it simple, it's like traveling to Mexico....you exchange your dollars for pesos and 10 years ago you'd get anywhere from 45-50 pesos per dollar you exchanged, 2 years ago you'd get 26 pesos per dollar and today you only get 10 pesos per dollar. If a barrel of oil from (in this example) Mexico were $40, then 10 years ago we'd get at least 1 barrel per dollar, while today we'd have to pay $4 for the same barrel of oil even though the price of the oil itself never went up at all.

OPEC knows that they're sitting just fine over there, because they haven't raised prices more than what would be considered normal due to the increased demand by the rest of the world that's being added on top of the demand the U.S. has had for years, however they also know that good-ole GW Bush has managed to put the entire U.S. economy in peril by getting us into the quagmire that is Iraq. It would be nice not to have to connect the 2 situations, but they ARE linked whether we like it or not.

 

[ZoomZoom Diva]

While Iraq is one reason for the increasing debt, saying that the entire U.S. economy is in peril is an overstatement, and there is little connection between the state of the economy and the situation in Iraq.

I also consider a substantial portion of the devaluation of the dollar to be due to paranoid speculation in the currency exchange markets and the paranoid speculation in the oil markets rather than based on sound fundamentals.

 

[Young Roids]

Weak dollar is a legitimate reason, but most people fail to recognize that the reason the dollar is wea now, is because of the shocking increase in our national debt over the last 6 years. I know a lot of people get pissed off at Democrats because they're known as the "tax and spend" party, however the alternative of spending while either not raising taxes or even lowering them means greater national debt. And while I understand the typical Republican platform is the intention of reducing spending and lowering taxes at the same time, this most recent administration has managed to attempt to lower taxes a couple of times while INcreasing spending to an UNFATHOMABLE level which has caused our National Debt to skyrocket, which in turn makes our dollar worth diddly-squat in the World economy.

To make it simple, it's like traveling to Mexico....you exchange your dollars for pesos and 10 years ago you'd get anywhere from 45-50 pesos per dollar you exchanged, 2 years ago you'd get 26 pesos per dollar and today you only get 10 pesos per dollar. If a barrel of oil from (in this example) Mexico were $40, then 10 years ago we'd get at least 1 barrel per dollar, while today we'd have to pay $4 for the same barrel of oil even though the price of the oil itself never went up at all.

OPEC knows that they're sitting just fine over there, because they haven't raised prices more than what would be considered normal due to the increased demand by the rest of the world that's being added on top of the demand the U.S. has had for years, however they also know that good-ole GW Bush has managed to put the entire U.S. economy in peril by getting us into the quagmire that is Iraq. It would be nice not to have to connect the 2 situations, but they ARE linked whether we like it or not.

You are on the money my friend. The biggest myth in politics is that the Republicans are fiscally responsible. George W has just destroyed our economy with his war. Makes me sick to think about it.

 

[YSOSLO]

I don't know that I would call the speculation regarding our currency and oil prices "paranoid." If any investor with the savvy to realize that a war in the Middle East is going to cost the U.S. a PILE of money that we don't have not to mention use a LOT more oil (since all of the vehicles the U.S. is using in Iraq are using more diesel on a daily basis that most of us could even imagine) all while more and more countries are becoming more technologically advanced and wanting things like cars and trucks to build their economies, then their "paranoid speculation" would actually be very logical speculation based on real expectations. If I had an extra million dollars laying around I'd have invested in oil as soon as Bush announced we were going to war....

 

[ZoomZoom Diva]

Despite the increase in demand for oil, there is little to indicate that supply is not more than enough to meet that demand both right now and for the duration of the oil futures currently reading on the commodities market, and the cost to produce and deliver that oil is far less than the current price. This indicates the fundamentals do not support the current price, and that we are victim of speculation. When you speak to the speculative analysts, they speak of risks that are very unlikely to occur or to occur to the extent to make the supply inadequate, so I consider that to be paranoia.

On the dollar, while the dollar amounts are large, the size of the total U.S. budget is so colossal that the spending in Iraq is a small percentage, and while a more significant reason for the increase in our debt, is still not a leading cause as the debt has increased by 2.768 trillion from the start of the war in Iraq to 12/31/2007, over 4x the amount spent on the war itself ($600 billion estimated from several sources) during that time. Also, while both the debt increase and the sheer level of government spending are significant problems, and cause for some decline in the value of the dollar, the magnitude of decline is beyond reason.