Drill here, Drill now, Pay Less.

patriot2342001 · #**561** (**permalink**) 06-28-2008, 12:09 PM

From todays' CSM:

For six years, the world has witnessed an intriguing phenomenon: Oil prices have soared as the US dollar has declined in value.

Now some economists say the simplest way to ease oil prices in the short term is to boost the value of the greenback.

It's a controversial idea. Clearly, oil prices are driven mainly by the fundamental trends of oil supply and demand. And even if an oil-dollar link does exist, economists say it's not clear that the dollar's downward trend can – or should – be reversed. Some say a weaker dollar is needed to help reverse America's large trade imbalance over time.

Still, with oil prices near record levels, concern about the dollar's dive is getting more attention.

"Increase the value of the dollar and lower the value of the euro. That by itself will lower [oil] prices, assuming all other things being equal," says A.F. Alhajji, an energy economist at Ohio Northern University in Ada. Beyond that, he says, the world will basically need to wait for market forces to adjust supply and demand.

If a steadier dollar would help, one positive sign is that the greenback has firmed up a bit in the past three months. But it's not clear how much it would need to rise – or how long it would take after that – to influence oil prices.

Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, said Thursday that the dollar is playing a major role in oil prices, and offered a hard estimate, according to a report by Marketwatch. At a meeting in Paris, he said a drop of 1 to 2 percent in the dollar versus the euro could add another $8 a barrel to oil prices.

The dollar-oil issue also came up Wednesday in a congressional hearing on whether high fuel prices are a bubble or a "new reality."

"While the correlation does not hold week in and week out, we believe that this trend – a falling dollar contributing to higher oil prices – is very strong," Daniel Yergin of Cambridge Energy Research Associates told senators.

Economists who see a dollar-to-oil link say it's operating through several channels, some long term and some short term:

A supply effect: The fact that oil is priced in a single currency worldwide – the US dollar – has significant effects on companies and nations that produce oil, Professor Alhajji says.

A rising price of oil has clearly brought billions in extra profits. But since the dollars that producers receive have gone down in value, that windfall has been partially offset.

As a result, he says, the oil-rich nations have probably been investing less in new oil production than they would have under a stable dollar.

Some analysts cast the impact on oil production in investment terms: If a nation's immediate economic needs are being met, why swap an asset that's rising in value (oil reserves) for one that's falling (dollars)?

A demand effect: Oil prices have been rising for consumers around the world. But this, too, has been partially offset in many nations by changes in currency rates. Europeans are buying more oil than they would if the US dollar were their currency.

"Because the dollar can't fall against the [government-managed] Asian currencies, it falls too much against the euro," says Peter Morici, an economist at the University of Maryland in College Park. "That gives Europeans more" to spend on oil.

A different effect is at work in China, which he says has been holding its currency artificially low as a way to boost exports. The result, Professor Morici argues, is a greater shift of manufacturing jobs out of the United States and into China. And because US factories use much less energy than those in China, this affects demand for oil.

"Every time a job leaves Indiana for Shanghai, oil consumption goes up," Morici says.

Moreover, in his view, China's resulting trade surplus has enabled the country to afford the artificially low fuel prices it sets for consumers – prices that China adjusted upward last week.

Still, it's hard to gauge how much oil demand has been affected by China's currency-managing methods. "Given the rapid economic growth rate, ... I would argue that demand from China would still be relatively robust" regardless of the exchange-rate policies, says Paul Ting, who runs an energy consultancy in Short Hills, N.J.

A financial effect: Low interest rates or rising inflation can cause investors to flee a currency. Those same rates can help drive up commodity prices and cause investors to buy oil contracts as a "hedge" against feared inflation.

One symbol of the problem: Investors holding US dollars now face negative real returns – interest rates below inflation.

The Federal Reserve has reduced short-term US interest rates to counter the threat of recession, but now is walking a fine line as markets increasingly are also worried about inflation.

"The more that people doubt the Federal Reserve's willingness to reverse this policy course they've chosen, the higher oil prices rise," says Tim Duy, an economist at the University of Oregon in Eugene.

In ordinary times, the Fed would focus on helping the economy out of its slump. This month, Fed Chairman Ben Bernanke said the Fed is now also "attentive" to downward pressure on the dollar.

Economists say that much of the global inflation pressure comes from emerging nations. They have kept money supply relatively loose, partly because their dollar-pegged exchange rates effectively link their monetary policy to that of the Fed.

Managed currency rates and fuel-price controls have put particular pressure on oil prices, Merrill Lynch analysts argue in a recent report. "As neither [emerging market] exchange rates nor domestic commodity prices could adjust through market mechanisms, world commodity price ... had to trend sharply higher in an effort to slow down demand," they write.

So it may be a range of exchange rates, not just the dollar, that's affecting oil prices.

How could the dollar be strengthened?

It might happen naturally, if markets decide that the greenback has dropped below its fair value.

Or sometimes, the world’s big governments can use words and currency trades in a concerted way to to affect the dollar.

Another way – controversial given the weakness of the US economy – might be for the Fed to raise short-term interest rates, which would give investors a better return on dollars.

mulp · #**562** (**permalink**) 06-28-2008, 12:09 PM

Quote:

Originally Posted by Obama's Empty Suit

Ain't no sunshine..... Now what libs?

It is merely a sign that Cheney is really pissed that so many people are embracing solar energy, and he is looking forward into the future and realizing that liberals will get credit for creating thousands of jobs, creating lots of new players in the energy market other than the oil and coal companies, and this will trigger a wave of investment like the tech boom that spanned the 60s through and reaching its peak in 1999, creating new powerful liberals just like Bill Gates and Elon Musk and Martin Eberhard and even Warren Buffett.

What if solar and wind power become cheaper than coal and nuclear?? What if electric cars become popular, changing the entire nature of how people think of transportation?? What if power generation becomes something that is distributed and no longer controlled by a small number of corporations?? What if everyone becomes an environmentalist? A tree hugger??

What if Republicans had to appeal to environmentalists and tree huggers for votes?

And this is already happening with the evangelicals surrounded by mountain top removal that turns favorite fly fishing streams into rivers of toxic waste. And evangelical leaders are preaching about being stewards of the earth.

Well, its clear that the solution is to defend polluting the beaches of the east and west coast and cutting pipeline across wilderness and creating pools of toxic waters by attacking solar projects as environmentally unsound.

After all, we already know the environmental devastation of mountain top removal and strip mining and the inevitable damage of oil spills on beaches and fish stocks, so we know those are worth it. If solar power doesn't harm the environment, how can it be worth the investment.

kgpoolerev · #**563** (**permalink**) 06-28-2008, 03:18 PM

Quote:

Originally Posted by patriot2342001

From todays' CSM:

For six years, the world has witnessed an intriguing phenomenon: Oil prices have soared as the US dollar has declined in value.

Now some economists say the simplest way to ease oil prices in the short term is to boost the value of the greenback.

It's a controversial idea. Clearly, oil prices are driven mainly by the fundamental trends of oil supply and demand. And even if an oil-dollar link does exist, economists say it's not clear that the dollar's downward trend can – or should – be reversed. Some say a weaker dollar is needed to help reverse America's large trade imbalance over time.

Still, with oil prices near record levels, concern about the dollar's dive is getting more attention.

"Increase the value of the dollar and lower the value of the euro. That by itself will lower [oil] prices, assuming all other things being equal," says A.F. Alhajji, an energy economist at Ohio Northern University in Ada. Beyond that, he says, the world will basically need to wait for market forces to adjust supply and demand.

If a steadier dollar would help, one positive sign is that the greenback has firmed up a bit in the past three months. But it's not clear how much it would need to rise – or how long it would take after that – to influence oil prices.

Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, said Thursday that the dollar is playing a major role in oil prices, and offered a hard estimate, according to a report by Marketwatch. At a meeting in Paris, he said a drop of 1 to 2 percent in the dollar versus the euro could add another $8 a barrel to oil prices.

The dollar-oil issue also came up Wednesday in a congressional hearing on whether high fuel prices are a bubble or a "new reality."

"While the correlation does not hold week in and week out, we believe that this trend – a falling dollar contributing to higher oil prices – is very strong," Daniel Yergin of Cambridge Energy Research Associates told senators.

Economists who see a dollar-to-oil link say it's operating through several channels, some long term and some short term:

A supply effect: The fact that oil is priced in a single currency worldwide – the US dollar – has significant effects on companies and nations that produce oil, Professor Alhajji says.

A rising price of oil has clearly brought billions in extra profits. But since the dollars that producers receive have gone down in value, that windfall has been partially offset.

As a result, he says, the oil-rich nations have probably been investing less in new oil production than they would have under a stable dollar.

Some analysts cast the impact on oil production in investment terms: If a nation's immediate economic needs are being met, why swap an asset that's rising in value (oil reserves) for one that's falling (dollars)?

A demand effect: Oil prices have been rising for consumers around the world. But this, too, has been partially offset in many nations by changes in currency rates. Europeans are buying more oil than they would if the US dollar were their currency.

"Because the dollar can't fall against the [government-managed] Asian currencies, it falls too much against the euro," says Peter Morici, an economist at the University of Maryland in College Park. "That gives Europeans more" to spend on oil.

A different effect is at work in China, which he says has been holding its currency artificially low as a way to boost exports. The result, Professor Morici argues, is a greater shift of manufacturing jobs out of the United States and into China. And because US factories use much less energy than those in China, this affects demand for oil.

"Every time a job leaves Indiana for Shanghai, oil consumption goes up," Morici says.

Moreover, in his view, China's resulting trade surplus has enabled the country to afford the artificially low fuel prices it sets for consumers – prices that China adjusted upward last week.

Still, it's hard to gauge how much oil demand has been affected by China's currency-managing methods. "Given the rapid economic growth rate, ... I would argue that demand from China would still be relatively robust" regardless of the exchange-rate policies, says Paul Ting, who runs an energy consultancy in Short Hills, N.J.

A financial effect: Low interest rates or rising inflation can cause investors to flee a currency. Those same rates can help drive up commodity prices and cause investors to buy oil contracts as a "hedge" against feared inflation.

One symbol of the problem: Investors holding US dollars now face negative real returns – interest rates below inflation.

The Federal Reserve has reduced short-term US interest rates to counter the threat of recession, but now is walking a fine line as markets increasingly are also worried about inflation.

"The more that people doubt the Federal Reserve's willingness to reverse this policy course they've chosen, the higher oil prices rise," says Tim Duy, an economist at the University of Oregon in Eugene.

In ordinary times, the Fed would focus on helping the economy out of its slump. This month, Fed Chairman Ben Bernanke said the Fed is now also "attentive" to downward pressure on the dollar.

Economists say that much of the global inflation pressure comes from emerging nations. They have kept money supply relatively loose, partly because their dollar-pegged exchange rates effectively link their monetary policy to that of the Fed.

Managed currency rates and fuel-price controls have put particular pressure on oil prices, Merrill Lynch analysts argue in a recent report. "As neither [emerging market] exchange rates nor domestic commodity prices could adjust through market mechanisms, world commodity price ... had to trend sharply higher in an effort to slow down demand," they write.

So it may be a range of exchange rates, not just the dollar, that's affecting oil prices.

How could the dollar be strengthened?

It might happen naturally, if markets decide that the greenback has dropped below its fair value.

Or sometimes, the world’s big governments can use words and currency trades in a concerted way to to affect the dollar.

Another way – controversial given the weakness of the US economy – might be for the Fed to raise short-term interest rates, which would give investors a better return on dollars.

As a result of the high price of gas there are more furniture plants opening back up for business in Nc. In the midst of hard times there are rays of hope but only if the price of shipping items from overseas allows American companies to be competitive. High gas prices do have a positive impact in some ways but the cost is too high for the average American to justify the continued blocking of logical drilling and building refineries.

Patriot, did you visit the fairtax.org ?

It is a very interesting site and if We, the People force Congress to go with a more logical tax system that encourages growth we will be better off. Better yet it would give the American people the ability to influence Congress whether they like it or not. In fact the American people could have either forced us out of Iraq or forced a good explanation of why we should still be there by Bush and the Democrat run Congress.

Sanford · #**564** (**permalink**) 06-28-2008, 03:31 PM

There's no excuse not to drill here. We have China drilling right off the coast of Cuba and that's only a hundred miles from the Florida shoreline .

If the Chinese have an accident with their equipment the Florida beaches will be poluted also. That's an argument the environmentalists take into consideration when they're shouting about drilling here polluting our beaches.

If we don't do it another country will and we'll get none of the benifits and all the polution.

smart makes a comeback · #**565** (**permalink**) 06-28-2008, 03:38 PM

Quote:

Originally Posted by Sanford

There's no excuse not to drill here. We have China drilling right off the coast of Cuba and that's only a hundred miles from the Florida shoreline .

If the Chinese have an accident with their equipment the Florida beaches will be poluted also. That's an argument the environmentalists take into consideration when they're shouting about drilling here polluting our beaches.

If we don't do it another country will and we'll get none of the benifits and all the polution.

Well by all means...lets emulate the actions of a repressive 3rd world communist country ! (Kooko, kooko, kooko)

We had a chance at a treaty which would have gradually brought China in to the fold and would have created an even playing field without hurting either the developing economies in the east. or the west, but Dubya had his lips attached to the oil companies, Utilities and coprerations collective nutsack, and we are now suffering becuse of it

kgpoolerev · #**566** (**permalink**) 06-30-2008, 07:59 AM

Quote:

Originally Posted by patriot2342001

From todays' CSM:

For six years, the world has witnessed an intriguing phenomenon: Oil prices have soared as the US dollar has declined in value.

Now some economists say the simplest way to ease oil prices in the short term is to boost the value of the greenback.

It's a controversial idea. Clearly, oil prices are driven mainly by the fundamental trends of oil supply and demand. And even if an oil-dollar link does exist, economists say it's not clear that the dollar's downward trend can – or should – be reversed. Some say a weaker dollar is needed to help reverse America's large trade imbalance over time.

Still, with oil prices near record levels, concern about the dollar's dive is getting more attention.

"Increase the value of the dollar and lower the value of the euro. That by itself will lower [oil] prices, assuming all other things being equal," says A.F. Alhajji, an energy economist at Ohio Northern University in Ada. Beyond that, he says, the world will basically need to wait for market forces to adjust supply and demand.

If a steadier dollar would help, one positive sign is that the greenback has firmed up a bit in the past three months. But it's not clear how much it would need to rise – or how long it would take after that – to influence oil prices.

Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, said Thursday that the dollar is playing a major role in oil prices, and offered a hard estimate, according to a report by Marketwatch. At a meeting in Paris, he said a drop of 1 to 2 percent in the dollar versus the euro could add another $8 a barrel to oil prices.

The dollar-oil issue also came up Wednesday in a congressional hearing on whether high fuel prices are a bubble or a "new reality."

"While the correlation does not hold week in and week out, we believe that this trend – a falling dollar contributing to higher oil prices – is very strong," Daniel Yergin of Cambridge Energy Research Associates told senators.

Economists who see a dollar-to-oil link say it's operating through several channels, some long term and some short term:

A supply effect: The fact that oil is priced in a single currency worldwide – the US dollar – has significant effects on companies and nations that produce oil, Professor Alhajji says.

A rising price of oil has clearly brought billions in extra profits. But since the dollars that producers receive have gone down in value, that windfall has been partially offset.

As a result, he says, the oil-rich nations have probably been investing less in new oil production than they would have under a stable dollar.

Some analysts cast the impact on oil production in investment terms: If a nation's immediate economic needs are being met, why swap an asset that's rising in value (oil reserves) for one that's falling (dollars)?

A demand effect: Oil prices have been rising for consumers around the world. But this, too, has been partially offset in many nations by changes in currency rates. Europeans are buying more oil than they would if the US dollar were their currency.

"Because the dollar can't fall against the [government-managed] Asian currencies, it falls too much against the euro," says Peter Morici, an economist at the University of Maryland in College Park. "That gives Europeans more" to spend on oil.

A different effect is at work in China, which he says has been holding its currency artificially low as a way to boost exports. The result, Professor Morici argues, is a greater shift of manufacturing jobs out of the United States and into China. And because US factories use much less energy than those in China, this affects demand for oil.

"Every time a job leaves Indiana for Shanghai, oil consumption goes up," Morici says.

Moreover, in his view, China's resulting trade surplus has enabled the country to afford the artificially low fuel prices it sets for consumers – prices that China adjusted upward last week.

Still, it's hard to gauge how much oil demand has been affected by China's currency-managing methods. "Given the rapid economic growth rate, ... I would argue that demand from China would still be relatively robust" regardless of the exchange-rate policies, says Paul Ting, who runs an energy consultancy in Short Hills, N.J.

A financial effect: Low interest rates or rising inflation can cause investors to flee a currency. Those same rates can help drive up commodity prices and cause investors to buy oil contracts as a "hedge" against feared inflation.

One symbol of the problem: Investors holding US dollars now face negative real returns – interest rates below inflation.

The Federal Reserve has reduced short-term US interest rates to counter the threat of recession, but now is walking a fine line as markets increasingly are also worried about inflation.

"The more that people doubt the Federal Reserve's willingness to reverse this policy course they've chosen, the higher oil prices rise," says Tim Duy, an economist at the University of Oregon in Eugene.

In ordinary times, the Fed would focus on helping the economy out of its slump. This month, Fed Chairman Ben Bernanke said the Fed is now also "attentive" to downward pressure on the dollar.

Economists say that much of the global inflation pressure comes from emerging nations. They have kept money supply relatively loose, partly because their dollar-pegged exchange rates effectively link their monetary policy to that of the Fed.

Managed currency rates and fuel-price controls have put particular pressure on oil prices, Merrill Lynch analysts argue in a recent report. "As neither [emerging market] exchange rates nor domestic commodity prices could adjust through market mechanisms, world commodity price ... had to trend sharply higher in an effort to slow down demand," they write.

So it may be a range of exchange rates, not just the dollar, that's affecting oil prices.

How could the dollar be strengthened?

It might happen naturally, if markets decide that the greenback has dropped below its fair value.

Or sometimes, the world’s big governments can use words and currency trades in a concerted way to to affect the dollar.

Another way – controversial given the weakness of the US economy – might be for the Fed to raise short-term interest rates, which would give investors a better return on dollars.

Fascinating article though the part about the dollar not being able to fall against Asian currencies is false. When I was stationed in Japan in the mid to lat 90s the dollar fell significantly against the yen. It is true that the Asian countries work very hard to keep our currency strong compared to theirs so we import their goods.

Now what does that article have to do with the US needing to drill where the oil is at in order to lower the price of gas?