Oil Gives Economy Both Barrels

Wall Street Journal ^ | 3/3/2012 | Liam Denning

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Most drivers are familiar with the nagging refrain of "Are we there yet?" But with gasoline heading back to $4 a gallon on average, it takes on more urgency: Oil can't go much higher without derailing the economy.

Brent crude oil is back above $120 a barrel. Looked at on a 12-month rolling average, it is now 6% above its prior 2008 peak. U.S. gasoline demand is down almost 7% year-on-year. This year, Europe is forecast to consume 10% less oil than it did in 2008. Global demand is still forecast to rise, but only in emerging markets.

Oil's high price greases this transfer of demand from the West to the rest. While mature economies are forced to brainstorm efficiencies, emerging markets offset the pain with faster economic growth and, often, consumer subsidies.

At some point, though, oil prices overwhelm everyone. Efficiencies take time to develop: The faster way to lower consumption is recession. In emerging markets, high oil prices stoke inflation and make subsidies unmanageable.

[allmost]

Done deal.

[allmost]

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[2001convSVT]

How long before President Obama calls for price controls?

[Sequoyah101]

Aren’t they like, speculators?

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They are both involved in speculation but hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying asset. Speculators make bets or guesses on where they believe the market is headed.

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http://wiki.answers.com/Q/Difference_between_speculation_and_hedging_strategies

[houeto]

He is really made. Try it from him..Whineing pathetic, too close to reality. must be nice. I qaulifiy one.

I've read through this thread 3 times trying to figure out what your problem is to no avail. Care to spell it out in simple, understandable terms?

[VRWC For Truth]

Oil isn't the cause. It's the symptom. The Democratic party along with the RINOs have derailed the economy with insane levels of spending.

[citizen]

I’m no oil analyst but it’s pretty clear that this oil bubble, assuming no Mid-East war, will be over long before October\November and gas will be at $3 or less, certainly well under $3.50.

If the Mid-East does go up in flames, I’ll probably buy a Volt and a 200 foot extension cord to charge it from my condo.

........just kidding

[U-238]

I agree.

[U-238]

I’m no oil analyst but it’s pretty clear that this oil bubble, assuming no Mid-East war, will be over long before October\November and gas will be at $3 or less, certainly well under $3.50.

I agree.I would say that speculation is driving up the prices.

http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm