Price of oil up $10 in the past week and the markets love it. The Saudis have been over producing on purpose for some time, but now that they've invaded Yemen things are better?
The price of oil has been too low to sustain the debt of the high cost producers and many banks were looking at the specter of bankruptcy in the oil patch impacting their loan portfolios. So maybe we just need to pay more for this cheap oil. By "us" I mean us. Then every thing will be fine. LOL.
Low energy prices have been a major impetus for deflation, perhaps low energy prices will paradoxically cause a rise in interest rates (see junk bond yields) resulting in less oil production leading to higher oil prices, higher inflation, higher interest rates, higher inflation, lower oil production, higher oil prices, higher inflation, higher interest rates..... Oh well, you get the picture....
The recent low prices of oil are largely the result of low interest rates. but the true cost of oil/energy is how much energy it takes to get a barrel of oil out of the ground. There is no doubt that we are working harder to get this energy to consumers. The recent finance has distorted the equation.
There seems to be a shift out of consumer goods and into materials.
No comments:
Post a Comment
All comments are appreciated as it will give me a chance to adjust my content to any real people who may be out there. Thank you. gh