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Just when everyone thought the big issues were interest rates and unemployment, oil is quietly creeping up again. It's back over US$63 a barrel and locally it's already put the pump price up a few cents with, judging by the increase in the wholesale petrol price, more to come soon at the pump.

And there were the bulls and those taking on massive mortgages so relieved that the high oil prices had passed. Perhaps not...

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I know, I know...

Give it time and we could well see the price of oil spike above $70 per barrel sometime later this year which would be interesting to say the least... ;)

I doubt it will attract headlines in the mainstream press until it sets a new high.

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It's been relatively quiet in Saudi/Yemen etc for a while, and there's been no major oil pipeline attacks in Iraq either. Question of time, IMO - in which case we will get a record spike. There really is no spare capacity left to rely on, and there's the backlog of overdue maintainance from the Hurricanes Rita and Wilma shutdowns.

The inflationary pressure is still there and the MPC knows it - the "February IR cut" isn't going to happen, and maybe was never going to happen - Eddie George has as good as said that the MPC sometimes talk up a move, as that often has all the beneficial effects of a real move.

Some people even think the next move will be up read this Times article. No move till after spring IMO, unless the Fed raises twice - in which case it's up we go, right in the middle of the "spring bounce".

Edited by Leodhasach

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Due to having more gas reserves than first believed, the price had dropped 7% today and the media says this is fantastic for consumers, trouble is they have forgotten the few hundred percent it jumped up the other month.

Talk about spin !

I can see the news now about house prices dropping a mere 7% and punters being told how lucky they all are.

Wait till people get there winter gas bills and then see how much better of they feel

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How do you all think the Bush administration is going to pull this off? (please note, I didn't say "Americans" as some of my closest friends are on t'other side of the pond I won't tar them with the same brush!!!)

Is a pull out of Iraq imminent? Sentiment against the war is growing in the US... I'm hearing rumours of our dear Tony will soon have to face the music because of lying to Parliament over WMD's. So how would they both pull off another invasion (or other military action) in enough time to save the petrodollar?

Are people really that stupid? (sometimes I wonder!)

If the Iran Bourse takes off and a large % of oil is traded in Euros, does anyone have any idea how long before serious effects are felt within the US economy? And how long could the effects be hidden now that the M3 is going to become top secret??

Sorry if any of the above is obvious - I'm no economist but very interested!!!

Thanks.

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Just when everyone thought the big issues were interest rates and unemployment, oil is quietly creeping up again. It's back over US$63 a barrel and locally it's already put the pump price up a few cents with, judging by the increase in the wholesale petrol price, more to come soon at the pump.

And there were the bulls and those taking on massive mortgages so relieved that the high oil prices had passed. Perhaps not...

I was rather enjoying the effect that high energy prices were having on consumer spending. With Mum & Dads only taking essential trips, they were saving more than just the cost of the petrol if you know what I mean.

It's a two sided argument you see.......

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I was rather enjoying the effect that high energy prices were having on consumer spending. With Mum & Dads only taking essential trips, they were saving more than just the cost of the petrol if you know what I mean.

It's a two sided argument you see.......

Hello TTRTR.

Two sided argument?

That's interesting, but you must agree that high oil prices have a marked inflationary effect.

:huh:

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But they also have a deflationary effect.

<_<

I think your getting confused somewhat.

High oil prices reflect strongly in the CPI inflation index. To say that they are deflationary to any extent is just being silly.

:blink:

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Like any kind of inflation. the more that has to be spent on one product, the less that can be spent on others.

Guess that means the market for hamsters is stuffed then.

Dames :)

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Are you making a case for higher oil prices = lower interest rates?

Unlikely mate, if they carry on up where they are at the moment, it is only a matter of time before they feed into the cost of everything and - inflation.

Inflation Up, World IR's Up (incl UK).

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As I have said in a previous thread high oil price tend to drive up unemployment.

The "Big energy users urge price hike restraint" artical in the Blg supports that asertion (which was backed by data.)

Rising unemployment coupled to current high levels of debt will see repossessions increase rapidly this year IMO.

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I doubt the Iranian oil exchange will happen and I would be absolutely amazed if US/Israel/Anyone attacked Iran with more than a couple of strategically placed bombs.

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Are you making a case for higher oil prices = lower interest rates?

Not at all!! Where did you get that idea from? Quite the opposite!!

Higher oil prices translate into higher inflation rates. Which if sustained, translate into higher interest rates.

Indeed high oil prices can be a trigger for stagflation (a recessive state with increasing prices).

<_<

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Not at all!! Where did you get that idea from? Quite the opposite!!

Higher oil prices translate into higher inflation rates. Which if sustained, translate into higher interest rates.

Indeed high oil prices can be a trigger for stagflation (a recessive state with increasing prices).

<_<

You clearly weren't reading your FT when oil prices were way up then......

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You clearly weren't reading your FT when oil prices were way up then......

Errr. As a matter of fact I was.

With oil prices $70+ the CPI had hit 2.5%. The subsequent fall in oil prices have seen the CPI tumble.

TRTTR, exactly what did YOU read in the FT then if not the above?

I suggest you read a basic textbook on economics. High oil prices do not equal low inflation. This is absurd...

:(

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You clearly weren't reading your FT when oil prices were way up then......

Check what happened the last time oil spiked to interest rates. Remember oil is still cheaper now (in real terms) than it was then, and we use less oil per %1 of GDP than we did then as well. If we had a spike of the size in the previous examples, its a choice between stagflation or hyperinflation. Interest rates are only as low as they are now because inflation is under reported. You love house price inflation, but its not taken into account in the figures. How do you explain that?

Like any kind of inflation. the more that has to be spent on one product, the less that can be spent on others.

Are you really suggesting that a fall in demand causes a fall in price equal to that fall in demand (and equal to the increase in price of oil derived goods) (the only way general prices can be kept neutral)? To have that situation, supply would have to be incredibly elastic. There are very few goods that are like that.

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Errr. As a matter of fact I was.

With oil prices $70+ the CPI had hit 2.5%. The subsequent fall in oil prices have seen the CPI tumble.

TRTTR, exactly what did YOU read in the FT then if not the above?

I suggest you read a basic textbook on economics. High oil prices do not equal low inflation. This is absurd...

:(

Exsqueeze me, but at which point did I say that high oil prices equalled low inflation?

Edited by Time to raise the rents.

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Guest wrongmove

I think your getting confused somewhat.

High oil prices reflect strongly in the CPI inflation index. To say that they are deflationary to any extent is just being silly.

:blink:

This seems to be a big debate among economists with no real concencus. Some say oil rise are inflationary (for obvious reasons) others say that oil is unique becasue everyone has to use it (inelastic demand), so rising oil prices act like rising IRs or rising taxes and are actually deflationary.

article: Oil prices pressuring the Fed

"...Rising oil prices can add to inflation if companies are able to pass along their own higher energy costs by raising prices. But eventually, higher oil prices can be deflationary. They slow the economy by diverting consumer and business spending to oil company coffers. A lot of that money goes overseas, where it does the U.S. economy little good...."

I have seen some very heated arguments about this on forums....

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This seems to be a big debate among economists with no real concencus. Some say oil rise are inflationary (for obvious reasons) others say that oil is unique becasue everyone has to use it (inelastic demand), so rising oil prices act like rising IRs or rising taxes and are actually deflationary.

article: Oil prices pressuring the Fed

"...Rising oil prices can add to inflation if companies are able to pass along their own higher energy costs by raising prices. But eventually, higher oil prices can be deflationary. They slow the economy by diverting consumer and business spending to oil company coffers. A lot of that money goes overseas, where it does the U.S. economy little good...."

I have seen some very heated arguments about this on forums....

But that's a point against GDP, not inflation. If you are getting less "goods" for the same money as you where a week ago, you have inflation. You raise the price of something and this is what happens.

To argue the alternative, you have to suggest that the increase in price of good A causes a fall in price in good B of more than the increase in price of good A. Even if oil prices act like a tax, why would that tax cause a decrease in demand in other goods, *larger* than the tax. You have got to have some pretty crazy multipliers going on to get something like that. Sounds like rubbish to me.

What you do get is lower growth and higher prices, the lower growth dosen't offset the rising prices, unfortunatly (and often because governments don't raise i.r rates quick enough because they are already unpopular because of high oil prices).

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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