Author Topic: Oil jumps to new record on dollar's fall  (Read 4689 times)

Finch

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Oil jumps to new record on dollar's fall
« on: March 04, 2008, 01:52:18 PM »
By JOHN WILEN, AP Business Writer  Mon Mar 3, 3:57 PM ET

NEW YORK - The surging price of oil reached another milestone Monday, jumping to an inflation adjusted record high of $103.95.

The weaker dollar that has propelled oil and other commodities prices higher sent light, sweet crude for April delivery past $103.76 a barrel on the New York Mercantile Exchange. That's the level many analysts consider to be the true record high for oil, after its $38 barrel price from 1980 is translated into 2008 dollars.

Futures later retreated from that high to settle up 61 cents at $102.45 after Royal Dutch Shell PLC said it would resume oil shipments from Nigeria that had been disrupted by rebel attacks.

Oil's most recent run into record territory has been driven by the greenback's slump against other world currencies. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

Gold, copper and wheat are among the other commodities that have rallied as the dollar has fallen.

"It's coming down to another commodity price rally," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.

The dollar has been weighed down by concerns about the U.S. economy and the Federal Reserve's interest rate cutting campaign. Lower interest rates tend to weaken the dollar, which fell Monday to a new low of $1.5275 against the euro.


The struggling dollar has prompted a wave of speculative buying by oil investors seeking a safe haven from the ongoing volatility of the stock market. Such speculation can become self-perpetuating, driving prices higher and attracting even more speculators.

Many analysts believe oil prices aren't justified by crude's underlying supply and demand fundamentals, and are due to fall at some point. While supply disruptions in Nigeria and the prospect of supply cutoffs from Iraq and Venezuela helped boost oil prices last year, domestic oil inventories are now rising even as a number of forecasters are cutting their demand growth predictions due to the slowing economy.

Late in Monday's session Shell said it would resume oil shipments from two of its Nigerian facilities that had been suspended under a declaration of force majeure, in which a company says it can't meet contractual delivery obligations due to events beyond its control, Dow Jones Newswires reported. It was unclear how much oil the facilities will pump. The news fed some of the late pullback in oil.

Investors are keeping an eye on OPEC, which meets Wednesday to consider production levels. Most expect the Organization of Petroleum Exporting Countries to hold output steady.

"Unless there's a surprise ... I think it's a non-factor at this time," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos., of OPEC's impact on trading Monday.

As for where oil goes from here, analyst estimates vary widely, with some predicting an eventual decline to the $65 or $70 range as supplies continue to grow and demand falls, and others seeing oil rising as high as $120 as investment capital continues to flow into oil markets from overseas.

For its part, the Energy Department's Energy Information Administration's latest prediction is that oil will average $86 a barrel in 2008, up 19 percent from 2007, when oil averaged $72 a barrel.

Surging oil prices are boosting prices at the pump. The average price of a gallon of gas stood at $3.165 Monday, according to AAA and the Oil Price Information Service. That's down 0.1 cent overnight, but up nearly 70 cents from a year ago. The Energy Department expects gas prices to peak near $3.40 this spring, well above May's record of $3.227, but some analysts predict prices could rise to nearly $4 a gallon.

Diesel prices, used to transport the vast majority of the nation's goods, are also surging. Diesel prices hit another new record of $3.674 a gallon Monday.

In other Nymex trading, April heating oil futures rose 3.39 cents to settle at $2.8408 a gallon, and April gasoline futures rose 0.21 cent to settle at $2.672 a gallon. April natural gas futures fell 2 cents to settle at $9.346 per 1,000 cubic feet.

In London, Brent crude futures rose 38 cents to settle at $100.48 a barrel on the ICE Futures exchange.
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Brad Johnson

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Re: Oil jumps to new record on dollar's fall
« Reply #1 on: March 04, 2008, 02:05:54 PM »
Cool.  Means my energy stocks just went up a little...

Brad
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RocketMan

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Re: Oil jumps to new record on dollar's fall
« Reply #2 on: March 04, 2008, 05:19:32 PM »
It's fistful's fault, of course.
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AZRedhawk44

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Re: Oil jumps to new record on dollar's fall
« Reply #3 on: March 04, 2008, 06:04:00 PM »
Quote
It's fistful's fault, of course.

Of course.  The DJIA saw that he changed his avatar from Clint to some silly monkey, and promptly dropped 437 points.
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Azrael256

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Re: Oil jumps to new record on dollar's fall
« Reply #4 on: March 04, 2008, 06:50:43 PM »
Yesterday's news.  Today oil dropped 2.9%, metals fell, and the dollar climbed.

Headless Thompson Gunner

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Re: Oil jumps to new record on dollar's fall
« Reply #5 on: March 04, 2008, 07:09:53 PM »
And, sadly, the Dow didn't fall 437 points.  I know, because I've been watching it like a hawk for the past month or so, hoping for it to drop.  I have some spare cash I want to invest, and I keep hoping prices are going to go down.

If the market would just hurry up and believe the economy sucks it would be a lot more profitable for me.  Why can't they go all Chicken Little on us like some members of APS love to do?

Paddy

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Re: Oil jumps to new record on dollar's fall
« Reply #6 on: March 05, 2008, 07:55:51 AM »
Both gold and silver are up again today.   grin   I paid $3.67/gallon for 87 octane yesterday. It'll be four bucks very soon. 

And like everyone else and waiting and hoping for the Dow to take a huge dump so's I can buy in again.  How much of a dump?  I'd like to see it under 10,000.

Manedwolf

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Re: Oil jumps to new record on dollar's fall
« Reply #7 on: March 05, 2008, 07:57:42 AM »
Unleaded is $3.01 here. It'll only be $4 in places like California with their insane treehugger laws.

Paddy

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Re: Oil jumps to new record on dollar's fall
« Reply #8 on: March 05, 2008, 09:01:02 AM »
Quote
It'll only be $4 in places like California with their insane treehugger laws.

$5 to your favorite charity/political party says you're wrong. Or $5 from you to the environmental organization of my choice if gas isn't at a national average of $4 or more by summer.

Ben

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Re: Oil jumps to new record on dollar's fall
« Reply #9 on: March 05, 2008, 09:05:36 AM »
Just jumped to $3.75 for regular, $3.99 for diesel at the station by my house.
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Azrael256

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Re: Oil jumps to new record on dollar's fall
« Reply #10 on: March 05, 2008, 09:21:29 AM »
Quote
And like everyone else and waiting and hoping for the Dow to take a huge dump so's I can buy in again
  Y'know, call me crazy, but I'm not seeing it.  Gas high?  Yes.  Dow falling through 10k?  Nah. 

Paddy

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Re: Oil jumps to new record on dollar's fall
« Reply #11 on: March 05, 2008, 02:02:34 PM »
Well, Manedwolf, is it a bet or not?  You made a proclamation and should stand by it.  The entertainment value, the sheer hilarity of you forking over even $5 to the Sierra Club or Greenpeace (or whatever other organization I think would humiliate you the most) would be priceless.

Gewehr98

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Re: Oil jumps to new record on dollar's fall
« Reply #12 on: March 05, 2008, 03:11:53 PM »
Correct me if I'm wrong, but don't they still burn that special "Reformulated" gasoline in Kalifornistan?
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Manedwolf

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Re: Oil jumps to new record on dollar's fall
« Reply #13 on: March 05, 2008, 03:16:14 PM »
Correct me if I'm wrong, but don't they still burn that special "Reformulated" gasoline in Kalifornistan?

Yes, they do. As per treehugger law demands.

Headless Thompson Gunner

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Re: Oil jumps to new record on dollar's fall
« Reply #14 on: March 05, 2008, 03:16:41 PM »
Quote
It'll only be $4 in places like California with their insane treehugger laws.

$5 to your favorite charity/political party says you're wrong. Or $5 from you to the environmental organization of my choice if gas isn't at a national average of $4 or more by summer.
One bad storm, or broken pipeline, or terrorist attack and gas prices will spike temporarily.  It wouldn't mean much, other than the fact that our usage is butting up against our supply capacity too closely for comfort.  No doubt some folks here would try to read far more into it than the situation merits.

Paddy

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Re: Oil jumps to new record on dollar's fall
« Reply #15 on: March 05, 2008, 03:24:56 PM »
Quote
One bad storm, or broken pipeline, or terrorist attack and gas prices will spike temporarily

All of which have ZERO to do with Manedwolf's despised 'treehugger laws'.  I'm saying gas prices will increase for a variety of reasons OTHER than the hated 'treehugger laws'.  The deterioration of the dollar, incipient recession, our total dependence on foreign oil, etc et yada.  Manedwolf made a pronouncement, but now he's not so sure about it.

As I understand it various states require different 'formulations' (which is really stupid; there should be a national standard).  California used to add MTBE but it polluted the drinking water in lakes and well, so now I think the additive is oxygen, and only in the wintertime. 

Oh, and by the way, remember awhile back when everybody crawled up my backside when I said oil was at $100 a barrel and it was only at $98 and some change?  Well, what was it today, $104?

And it will continue to go higher.  So chew on that.  laugh

Headless Thompson Gunner

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Re: Oil jumps to new record on dollar's fall
« Reply #16 on: March 05, 2008, 03:35:39 PM »
Quote
One bad storm, or broken pipeline, or terrorist attack and gas prices will spike temporarily

All of which have ZERO to do with Manedwolf's despised 'treehugger laws'.  I'm saying gas prices will increase for a variety of reasons OTHER than the hated 'treehugger laws'.  The deterioration of the dollar, incipient recession, our total dependence on foreign oil, etc et yada.  Manedwolf made a pronouncement, but now he's not so sure about it.

That's precisely my point.  The reality is a lot less exciting than you make it out to be.   Oil spiked today because of a supply shortfall, not because of recession or dollar fears.   The problem is that we don't have enough excess capacity to buffer out these temporary problems with supply, so prices inevitably spike. 

The reason we don't have enough excess supply is because of environmentalism run rampant.  The oil companies don't dare risk investing in new infrastructure given the current political climate.  Existing treehugger law, and more importantly, the prospect of newer and more onerous treehugger law in the future, makes it economically impossible to produce new capacity.  Our only alternative is to buy oil, and now even refined gasoline, from foreign countries that don't let their treehuggers get in the way of progress and prosperity.

I know it's sexier to believe in Chicken Little stories about hyperinflation and whatnot, but that's simply not what's happening here today.  Prices will certainly spike again in the future, the next time supply falls short.  But the issue won't be the value of the dollar or the state of our economy then, just as it isn't now.

Paddy

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Re: Oil jumps to new record on dollar's fall
« Reply #17 on: March 05, 2008, 03:43:54 PM »
Quote
The reason we don't have enough excess supply is because of environmentalism run rampant.  The oil companies don't dare risk investing in new infrastructure given the current political climate

And yet those same victimized oil companies are charging historic prices and enjoying historic profits.

Yer breakin' my heart.

The problem is not environmental regulation, the problem is that we have no national energy policy.  Carter laid one out and had it been followed, we'd be light years ahead of where we are today, and gas would be nowhere near $3+/gallon.

But if blaming some ragtag treehuggers makes you feel better,  go for it. 

Manedwolf

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Re: Oil jumps to new record on dollar's fall
« Reply #18 on: March 05, 2008, 03:49:02 PM »
You're completely missing the point that gasoline is typically $1 more in California than in the rest of the country because of the treehugger laws.

Headless Thompson Gunner

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Re: Oil jumps to new record on dollar's fall
« Reply #19 on: March 05, 2008, 03:49:55 PM »
You're completely missing the point that gasoline is typically $1 more in California than in the rest of the country because of the treehugger laws.
That is true.

Paddy

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Re: Oil jumps to new record on dollar's fall
« Reply #20 on: March 05, 2008, 03:50:06 PM »
Quote
You're completely missing the point that gasoline is typically $1 more in California than in the rest of the country because of the treehugger laws.

Prove it.

Gewehr98

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Re: Oil jumps to new record on dollar's fall
« Reply #21 on: March 05, 2008, 03:52:48 PM »
Not to repeat what's already been said, but I believe Mike thoroughly fisked the previous silliness about Carter's so-called energy policy.

Reformulated gasoline cost me more when I was a Kalifornistan resident than the normal stuff did over on the Nevada side of the border, btw.
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Headless Thompson Gunner

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Re: Oil jumps to new record on dollar's fall
« Reply #22 on: March 05, 2008, 03:57:14 PM »

The problem is not environmental regulation, the problem is that we have no national energy policy.  Carter laid one out and had it been followed, we'd be light years ahead of where we are today, and gas would be nowhere near $3+/gallon.
Carter's energy policy was to mandate higher fuel efficiency and some solar power.  Whoopiedo, that.  Besides being blatantly unAmerican, it's entirely unrealistic to think that government-mandated restrictions on fuel usage and government-mandated reliance on nonviable technologies would provide a long term solution to our energy problems.

The solution is to turn the industrialists loose and let them produce the energy we need.  It's as simple as that.

Paddy

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Re: Oil jumps to new record on dollar's fall
« Reply #23 on: March 05, 2008, 04:18:46 PM »
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You're completely missing the point that gasoline is typically $1 more in California than in the rest of the country because of the treehugger laws.

You're wrong AGAIN.  At least you're consistent.  Those were only two of ten principles, followed by a half dozen goals. Here's the outline from his 1977 speech:

Our national energy plan is based on ten fundamental principles.

The first principle is that we can have an effective and comprehensive energy policy only if the government takes responsibility for it and if the people understand the seriousness of the challenge and are willing to make sacrifices.

The second principle is that healthy economic growth must continue. Only by saving energy can we maintain our standard of living and keep our people at work. An effective conservation program will create hundreds of thousands of new jobs.

The third principle is that we must protect the environment. Our energy problems have the same cause as our environmental problems -- wasteful use of resources. Conservation helps us solve both at once.

The fourth principle is that we must reduce our vulnerability to potentially devastating embargoes. We can protect ourselves from uncertain supplies by reducing our demand for oil, making the most of our abundant resources such as coal, and developing a strategic petroleum reserve.

The fifth principle is that we must be fair. Our solutions must ask equal sacrifices from every region, every class of people, every interest group. Industry will have to do its part to conserve, just as the consumers will. The energy producers deserve fair treatment, but we will not let the oil companies profiteer.

The sixth principle, and the cornerstone of our policy, is to reduce the demand through conservation. Our emphasis on conservation is a clear difference between this plan and others which merely encouraged crash production efforts. Conservation is the quickest, cheapest, most practical source of energy. Conservation is the only way we can buy a barrel of oil for a few dollars. It costs about $13 to waste it.

The seventh principle is that prices should generally reflect the true replacement costs of energy. We are only cheating ourselves if we make energy artificially cheap and use more than we can really afford.

The eighth principle is that government policies must be predictable and certain. Both consumers and producers need policies they can count on so they can plan ahead. This is one reason I am working with the Congress to create a new Department of Energy, to replace more than 50 different agencies that now have some control over energy.

The ninth principle is that we must conserve the fuels that are scarcest and make the most of those that are more plentiful. We can't continue to use oil and gas for 75 percent of our consumption when they make up seven percent of our domestic reserves. We need to shift to plentiful coal while taking care to protect the environment, and to apply stricter safety standards to nuclear energy.

The tenth principle is that we must start now to develop the new, unconventional sources of energy we will rely on in the next century.

These ten principles have guided the development of the policy I would describe to you and the Congress on Wednesday.

Our energy plan will also include a number of specific goals, to measure our progress toward a stable energy system.

These are the goals we set for 1985:

--Reduce the annual growth rate in our energy demand to less than two percent.

--Reduce gasoline consumption by ten percent below its current level.

--Cut in half the portion of United States oil which is imported, from a potential level of 16 million barrels to six million barrels a day.

--Establish a strategic petroleum reserve of one billion barrels, more than six months' supply.

--Increase our coal production by about two thirds to more than 1 billion tons a year.

--Insulate 90 percent of American homes and all new buildings.

--Use solar energy in more than two and one-half million houses.

http://www.pbs.org/wgbh/amex/carter/filmmore/ps_energy.html

And Mike didn't 'fisk' anything.  All he did was more apologetics for Reagan's failed fiscal policies.

Headless Thompson Gunner

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Re: Oil jumps to new record on dollar's fall
« Reply #24 on: March 05, 2008, 04:44:17 PM »
You call that an effective energy policy?  Puh-lease...

1) Government solution is the best solution
2) Conserve
3) Conserve
4) Conserve, use coal instead (not a bad idea, but not very practical)
5) Conserve
6) Conserve
7) Force people to pay more for their energy than it's worth
8 ) Make government policy predictable (a darned good idea)
9) Conserve
10) Develop technologies that aren't viable

I'll grant that using coal is a good idea.  But the same problem plagues coal as plagues oil.  The environmentalists scream bloody murder whenever we try to use it.  Coal isn't a liquid fuel, and as such it won't power vehicles.  We'd have to build some sort of new national coal-to-liquid infrastructure, and that's borderline impractical.  But it makes more sense than most of the other points in this so-called energy policy.

Number Eight is a very good idea. Implementing that alone would solve a lot of problems.  Industry is unwilling to commit the massive amounts of money needed to develop new supply because of the uncertainty of future laws, restrictions, taxes, and regulations.  If we could eliminate that uncertainty, perhaps by grandfathering any new facilities for 30 or 40 years, we'd find that a lot of our problems disappear.  So I'll grant you that that one portion of Carter's policy would have helped matter out a lot.

But in the end, Carter's energy policy boils down to two things: be more efficient (conserve, use less fuel) and rely on solar power and other alternative technologies that don't really work.  And that's only if you can you can stomach Big Government stepping in and trying to control our energy usage by fiat.

No thanks, Carter.  I'll hold out for a real energy solution.