What role has the Bush deficit devalued dollar played in oil peaking over $96 per barrel today?

Question

"The market nervously watched the price of oil, which passed $96 a barrel overnight for the first time before dipping on profit-taking."
http://news.yahoo.com/s/ap/20071101/ap_on_bi_st_ma_re/wall_street

Oh, so even though OPEC sets the price of oil on the US dollar, a devalued dollar plays absolutely no role in the price. It is ALL due to speculators and NOTHING to do with the nose diving dollar. Thanks guys. Hey, check out this bridge I'm selling next week.

Answer 1

ZERO. Bush has NOTHING to do with the price of oil. Supply and demand is the bottom line that determines the price - as well as OPEC who actually sets the price, but this is based on demand. Today the world has unprecedented demand for oil, largely due to the emergence of the Chinese and Indian economies - the worlds most and second most populous nations. Not to mention our own increased demand over the years.Owning a personal vehicle in China is becoming more mainstream. Since China switched to a Communist / Capitalist system, their citizens have benefited greatly from all the US Dollars going into their economy. This has allowed ordinary people to own vehicles who had never owned them before.

Answer 2

None. A short-term spike like that has little to do with the effects of sustained inflation, or even the price level at the time. Oil shot up today because of some suply data, that's it. It is telling, though, that in real (constant-dollar, inflation adjusted) terms, the price of oil has finally matched the highs of the 'oil crisis' we had in the Carter years.

With oil this high, the dollar weak, and irresponsible fiscal policy likely to continue (but shift from suply-side stimulus to Keynesian) when a Dem takes office in 09, we may even have a replay of 70's 'stagflation.'

So, those who don't remember it will finally understand what it was like... I'm kinda looking forward to it, in sad, cynical sort of way.

Answer 3

Acccording to the economics professor I talked to last week, oil goes up because demand goes up. Demand is soaring from China especially. It's not just because their population is gaining some affluence and buying cars either. All those plastic things they manufacture are made from petroleum, as well as all the shipping. The world economy is pretty good all in all, and that further drives up price. Add a little instability from the Turkish/Kurdish situation and of course oil is going to go up. It has nothing to do with U.S. currency.

I live in the Upper Midwest. A lower valued dollar is a good thing. We are exporting far more corn and soybeans now and lots of money is flowing into our economy. You can clearly see the positive effects. I'm hoping the dollar doesn't go up much in coming years.


Kent in SD

Answer 4

It is actually hard to pin point the exact cause of this surge in oil prices.

A devaluated dollar dose have a factor, but the price of oil is going up in real terms as well which means it cannot be the only factor.

http://online.wsj.com/article/SB119378768690976877.html?mod=DEN

Answer 5

None. Economists know oil prices are up because Clinton pushed the world into letting China join the WTO. That caused explosive growth in China.

China uses oil for asphalt, for oil emulsions(to stabilize dirt roads before paving ), for gasoline, for jet fuel, for plastic, etc..

Clinton sold out to China ( http://graphics.jsonline.com/graphics/bym/img/mar06/CHINA24g.gif ) by forcing the world to let China into the WTO. Also, Clinton decided to spend hundred of billions by giving medical benefits, food stamps, and social security to foreigners in America. Clinton's website lists that as an accomplishment.

Within 10 years, the trade deficit with China will top $1 trillion yearly. That will seriously slow tax revenue growth. Thankfully, the taxcuts are working to counter the damage Clinton did. This year's budget deficit is the lowest in 5 years due to economic growth which increased tax revenue..

One thing a lot of people don't know is the Democrat National Committee took campaign donations from China. And Clinton secretly gave military secrets to China. That action has put the U.S. at risk for a nuclear missile attack from China. (Two foreigners involved in the case pled guilty and for some unknow reason they were not sentenced to jail.) Also, China secretly helped fund Bill Clinton's legal defense. Democrat politicians don't want the public to know the real facts about Clinton and China. These are just a few of the government documents relating to the Clinton and China.
http://www.senate.gov/~govt-aff/20.pdf
http://www.usdoj.gov/opa/pr/1999/May/213crm.htm
http://www.senate.gov/~gov_affairs/18.pdf
http://www.rules.house.gov/archives/rules_burt04.htm

Answer 6

None, purely speculators driving up price on futures. Here is what happens with a devaluing dollar, Per Alan Greenspan

Although the dollar's exchange rate has been declining since early 2002, increasingly tight competitive conditions in the United States, as elsewhere, in 2002 and 2003 apparently induced exporters to the United States to hold dollar prices to competitive levels to ensure their market share and foothold in the world's largest economy. For example, from early 2002 to early 2004, the dollar's exchange rate against the euro and sterling, on average, declined about 30 percent, yet dollar prices of imported manufactured goods from the European Union rose by only 9 percent, slightly more than dollar prices of U.S. manufactured goods during the same two years.

The consequence of the relatively small rise in the dollar price was a significant compression of gross operating profit margins on European exports to the United States. In recent years, exporters, not only in Europe but in many other trading partners of the United States as well, have tended to increasingly absorb declines in prices denominated in their own currencies when their currencies rose and to fatten profit margins when their currencies fell.

Unit labor costs in euros and sterling, for example, increased nearly 2 percent between the first quarter of 2002 and the first quarter of 2004. So, given the average fall in euro and sterling prices of European exports to the United States, gross operating profit margins on those sales must have declined more than 20 percentage points.3 The margin squeeze, in effect, absorbed about three-quarters of the decline in the dollar's exchange rate relative to the euro and the pound, on average, over the two years. Export margins, as I indicated earlier, had apparently risen to high levels by early 2002, following the roughly 40 percent increase in the value of the dollar in terms of euro and sterling from 1995 to 2002. Hence, margins in early 2004 might still have exceeded their levels of 1995.

However, with the strengthening of sterling and the euro that resumed in the last three quarters of 2004, exporters to the United States exhibited significant resistance to further lowering of euro and sterling prices. Accordingly, dollar prices of imports from Europe picked up a bit. This pickup suggests that profit margins were minimal at best a year ago and hence that exporters were willing to lose some U.S. market share rather than compress margins still further. A noticeable downtrend in the share of European exports in U.S. imports has been apparent over the past year.

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Answer 7

None. Speculators drive up the prices by bidding high on futures. Are you so blinded by disaffection for Mr. Bush that you cannot understand any basic political or economic issue?

Answer 8

I would say none. It is an environmental issue. We need to find alternative fuel sources and stop being drug around by foreign oil countries and their counterparts.

Answer 9

It is not just the de-valuing of the dollar but it is also creating more tension in the middle east by drumming up more talk about us in another middle east war.

The good thing is that we only have another year of this to go.

Answer 10

The Americans have just stolen Billions and billions of Barrels from Iraq........ It should be cheaper if anything !!!

Bush and his mates must be Raking it in.
But then again, The Worlds Oil is running out.
Thats Why Bush blew up the twin Towers and linked it to Iraq........ so he could get the Oil before China and India, and also make sure its still sold in Dollars.