Andy1234

Best Investments for Rising Oil

But the currency exchange does in fact directly effect the supply of any commodity.

As exchange rates go up and down....the operating costs from countries outside the USA go up and down........if the exchange of ones currency goes up 50% against the dollar while the commodity price does not.....their operating costs increase and they make a lot less profit or potentially lose money from currency exchange differences. weak dollar does affect commodity prices if the lions share of the certain commodity is produced in another country....or if the USA exports that commodity (the us dollar decreases and the purchasing power of other countries increase increasing demand for the commodity the USA produces).


On Jun 07 09:25 PM BrotherMaynard wrote:

> RE: Nelsanity
>
> "Oil being priced in dollars is not comparable to your house (assuming
> you live in the US). When Saudi Arabia sells a barrel of oil in dollars
> what are their costs in?"
>
> Look...the currency markets are seperate from the commodities markets,
> fundamentally speaking.
>
> There is no fundamental reason for the commodity/currency trade other
> than speculators think it is a better store of value than the dollar
> (or whatever currency happens to tickle everyone's fancy).
>
> The dollar movement has nothing to do with fundamental supply and/or
> demand for the commodity, any more than it does any other asset on
> the planet.
>
> The dollar can go all over the place, but commodity prices are ultimately
> a function of supply/demand, not currencies, despite their obvious
> correlations. Somebody must buy or sell the actual commodity to set
> the prices...the prices just aren't "adjusted" by a market maker.
>
>
> Again, the dollar/commodity trade Its merely a speculative store
> of value. It is not an axiomatic price-setting mechanism like supply
> and demand, and therefore buying/selling commodities becuase of currency
> movements is more noise than signal. And if it goes on long enough,
> you start to get large dislocations.

Oil Won't Stay Down for Long

If oil was such a speculative bubble.....why didn't production increase over this mania?

And where were these people hoarding the oil? it sure wasn't in inventory or the SPR.

In order to kil 1% of demand.....price needs to rise 8-20% (depends on how high the price is to begin with).

So things do go parabolic if a perceived shortage might exist in the near future.

But at the same token.....once you start gaining back a supply cushion....things go just as fast in the opposite direction.

It still comes back to supply and demand.......the downside is limited to the cost of production for new supplies.....and the upside is limited to the price that a certain amount of consumers can afford at the current rate of production.


I don't know what the upside is on oil.....but the cost for most of the new oil coming online is between $40-80/barrel depending on where the oil is coming from (deep sea or oil sands). Given a 6% decline rate on conventional low cost oil fields....and a production of 74MBPD.....in 10 yrs thats roughly at 40MBPD........oil is going up long term.

The icing on the cake is the printing press......more dollers = inflation.....we might even see hyperinflation in the future......that is if people go back to the normal spending habits.

Oil Won't Stay Down for Long

I agree with this article.