Monday, May 02, 2011

...And Gas Prices Continue to Climb

gas prices Gasoline prices continue to increase.

Many thought that the death of Osama Bin Laden, or Usama Bin Laden for the Fox News readers, would help to bring down oil prices down. Initially, this happened. But oil prices rebounded as the day went on.

The thought is that just because Osama is dead, it doesn't mean that terrorism is over. In addition, there are some other issues facing the economy.

First, oil prices are determined by supply and demand. Even though some of the economic numbers have come in a little murky lately, the GDP is not negative. The economy is sluggish at 1.8%, but it is positive growth. In addition, world economies are doing better as well.

Next, the Federal Reserve is keeping interest rates low and continuing with Quantitative Easing. This is putting pressure on the dollar. Oil is denominated in dollars. In addition, the annual deficit is $1.6 trillion, while the US debt is over $14 trillion dollars. This also puts pressure on the dollar. Again, oil is denominated in dollars.

There is talk about "oil speculators" driving the price of oil up. But there are over 80 million barrels of oil consumed a day. And these folks are really betting against the economic policies of Obama, Geithner, and Bernanke. It's been the right environment to make money in commodities. In addition to oil, just look at the price of gold, silver, cotton, sugar, etc.

Is there anything on the horizon that could bring down the price of oil and gasoline? Absent a recession?

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