Tuesday, December 28, 2010

Oil starting to really pressure U.S. Economy (again)

Consumer confidence and home price data out today support my contention that Oil is choking the living snot out of the U.S. economy.

This does not mean that Oil prices can't come in... if that happens that would lend a great deal of support to what the fed is doing... but think about that for a sec... Oil get s cheaper in $$ printed up from thin air?  Anything can happen... I just find it hard to come around to that way of thinking.


Every market in the U.S., but especially the thinner markets, are under the control of the 1,000 biggest hedge funds.  My bet is they are behind Silver's recent run up... they are buying to get the big print on 12/31 and with it, a big increase in their performance allocation (their cut of the profits)... if I am correct, look for a very tough Q1 2011 for Silver... No opinion on Gold at the moment and at these prices.

I feel the same about Nat Gas as I do about Silver, but in reverse... between the tax loss selling in UNG and the depressed futures market, my bet is Nat Gas has a pretty good Q1 2011.  If not, I am going to sell every %#$^!! contract I have.


OPEC says the market is "well supplied" with Oil.  It always amazes me to see that.  Of course the market is well supplied with $91.40 Oil.... there is a serious shortage of $80 Oil, and an overwhelming glut of $100 Oil at the moment... but nothing like the GLUT in disinformation and propaganda.



bureaucrat said...

Once again, the EIA charts show no shortage of (U.S.) oil. The price runup is speculation. Wake me up when the U.S. oil in storage crosses under the 5-year average band. There is no oil supply problem here ... yet.

And as you mentioned, a slowing economy will result from oil prices rising too high. Oil prices are self-limiting. There will be no sustained "oil prices to the moon." The oil will slowly cut off the economy until there is a market selloff, a la 2008, and oil prices will come back down again.

PioneerPreppy said...

I partially agree with Bur. It is speculation but I kinda believe it is coming from the source this time and not just financial/commodity speculators.

Some article I read just the other day had a quote from one of the OPEC countries saying that the world economy could afford $100.00 oil. Personally I am betting on much lower production and smaller reserves than these countries have been reporting. The flow is beginning to slow down noticeably and they know they can begin the price rise in earnest now.

Or maybe I am completely wrong. Guess we won't know till the fat lady sings. :)

Anonymous said...

Those with storage capacity have been buying the dips and keeping the tanks full. I'd bet that they think it is the cheapest oil they'll ever buy. World wide stockpiles are down and the price is up. Not usually a sign of rampant speculation. In a speculative bubble, inventories rise along with the price. Not the case now.

The next oil-induced recession will set us back again. Yes, the price of oil is self limiting, but at great cost to those who suffer the economic consequences. Bur does not seem to recognize this as THE problem, or even a problem. He has never had personal responsibility for children or others who depend on him. Perhaps that is why he is so glib and truly callous about this.


Coal Guy.


Oil will continue increasing in price.