Saturday, Oct 13, 2007
Speculative demand pushes up oil price
FT: Turkey fears send oil to record high
"Crude oil prices on Friday surged to a fresh high of $84 a barrel on concerns that Turkey might soon launch an invasion of northern Iraq in an attempt to hit Kurdish militants it accuses of attacking Turkish targets."
Posted by trough2010 @ 09:23 PM (603 views) Add Comment
6 Comments
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1. new_order said...
Everyone let them invade Northern Cyprus and North London, so why not Northern Iraq.
On a more serious note, I do not have economics expertise regarding oil but I imagine this would be something that hits our economy and hence house prices. I welcome anyone to give more specifics on the links between HPC and oil.
2. Flash_2007 said...
I was expecting a pull back in the oil price like there was this time last year but this doesn't seem like its going to happen. Despite this I do believe we will see $100 pb by next summer. If the price drops in the short term this will create a buying opportunity for spread betting or etfs.
3. harold said...
Oil prices are linked to the value of the (petro)dollar. The FED has been merrily printing dollars to pay for American consumption/military for years. These dollars have been stored in vast reservoirs (foreign currency reserves), which are now beginning to leak. The high price of oil - which is always blamed on crisis/supply - is actually a result of inflation. That is, if you want to see the true extent of inflation around the globe, just look at the price of oil. Why don't the media blame the price of oil on the FED's inflationary policies, rather than on spurious nonsense about supply/war (which has always existed)? It is only a matter of months before this inflation spills into the broader economy. Anyone for interest rates of 15% - 20%?
4. planning4acrash said...
Harold, you are wrong about supply, which has not grown for a couple of years now in the face of a approximately 2% increase in demand during that period. Supply could well fall pretty soon and $100/barrel is being talked of as likely very soon. With regards to the price of oil? Part of it is inflation, another is that, with oil priced in dollars, the price of oil must rise in response to the falling value of the dollar, but that only explains part of the rise in oil, the rise of oil relative to sterling and other currencies is the result of inflation.
Oil prices feed into inflation, via petrol (quickly), then slowly feeds through to all other produces (notably food via massive use of oil for fertilisation, pesticides, transport and conflict between food crops and biofuels) but all products are affected.
If we get inflation, interest rates must rise, if interest rates rise the cost of mortgages and other loans go up and this re-prices speculative assets including houses.
So, higher oil (if sustained) = lower asset (house) prices.
5. sirgoogle said...
I wonder what the US will do?
6. planning4acrash said...
The US's debt to other countries falls as their currency devalues, so their interest payments and getting rid of debt becomes easier, to the expense of all others including us. Plus, a lower dollar may boost employment with exports becoming cheaper, but they are running a tightrope because inflationary pressures increase as the currency falls, so I'd expect an overshoot then some protection of the currency, a fudge and compromise, as is the case with any economy at any point in time.