Wednesday, September 12

Is it really mysterious?

The headline on CNN's business page is The Mystery Behind Surging Oil... what's pushing oil to $80?.

Some short-term factors are plain to see. There's the big drop in crude inventories and a reported shutdown of nearly 200,000 barrels from Alaska's North Slope - a fourth of the region's total output - and a gathering storm in the Atlantic.

Yet at the same time, crude inventories, while declining recently, remain above average for this time of year...

Add to this the end of summer driving season and the rise of oil prices to eight times what they were in the late 1990s remains something of a mystery.

Perhaps the answer is in the other big headline of the day: No relief in sight for battered dollar.

The dollar is down across the board. The Euro is at a record high. If you're traveling, prices are brutal.

We import oil from other countries, so if the dollar is weak, then oil should cost more, duh. All imported products should be more expensive.

A weak dollar comes from two places: the Fed 'injecting' money into the economy, which reduces the value of a dollar, and our trade deficit with other countries, especially China, who now have lots of dollars so they value payments in dollars less and less against their own currencies.