a steady march upward that will take gasoline to $7 a gallon and oil to $225 by 2012

[obie7661]

...a steady march upward that will take gasoline to $7 a gallon and oil to $225 by 2012....

http://www.newsweek.com/id/141524

[TigerCoach]

Will never happen.

[obie7661]

Will never happen.

I hope you're right, but never's a long time.

If someone had predicted over $4.00 per gallon gas, and oil at around $150.00 a barrel 2 or 3 years ago -- I'm sure some would have said, never happen.

Until the law of supply and demand is repealed, I believe we have a lot of trouble ahead. I hope not, but that's my opinion.

TigerCoach, I hope you can say I told you so, in the near future. I'd be very happy to be wrong on this one.

[TigerCoach]

There's no way you can justify oil prices doubling in the past year. Not even supply & demand alone can have that effect. There are several factors that have come together in the "pefect storm" scenario.

1) Higher demand from Asia
2) Valuation of the U.S. Dollar
3) Credit crisis in the U.S. (which puts further pressure on the dollar)
4) Summer driving season (part of #1)

Once the dollar gets moving back to normal valuations versus other currencies, the price of oil should correct back to long-term trendlines of $70-$80 per barrel.

If the Treasury Dept and the Federal Reserve would get together and conduct Open Market Operations and sell more Treasury Bonds, while at the same time making comments that the purpose is to stabilize the dollar, things would turn around rapidly in the oil markets.

There is no credit shortage out there. It's that people are afraid to use that credit. The value of the dollar is down not only because of low interest rates, but also there is too much credit. Soak up that credit (sell them Treasuries) and the dollar rises. Raising the Fed Funds rate would also help.

The key is that these agencies need to communicate the purpose of what they are doing.

[obie7661]

There's no way you can justify oil prices doubling in the past year. Not even supply & demand alone can have that effect. There are several factors that have come together in the "pefect storm" scenario.

1) Higher demand from Asia
2) Valuation of the U.S. Dollar
3) Credit crisis in the U.S. (which puts further pressure on the dollar)
4) Summer driving season (part of #1)

Once the dollar gets moving back to normal valuations versus other currencies, the price of oil should correct back to long-term trendlines of $70-$80 per barrel.

If the Treasury Dept and the Federal Reserve would get together and conduct Open Market Operations and sell more Treasury Bonds, while at the same time making comments that the purpose is to stabilize the dollar, things would turn around rapidly in the oil markets.

There is no credit shortage out there. It's that people are afraid to use that credit. The value of the dollar is down not only because of low interest rates, but also there is too much credit. Soak up that credit (sell them Treasuries) and the dollar rises. Raising the Fed Funds rate would also help.

The key is that these agencies need to communicate the purpose of what they are doing.

Well, like I've said previously, I hope you're right. Also, the economics you write about are way over my head. So I won't pretend to understand what you write about.

All I know is what I see, hear and read. That being Worldwide oil consumption and production is about equal. We still drive too much, no matter what the price. Every time someone breaks wind in the Middle East, oil goes up. Same thing when a hurricane heads toward the Gulf of Mexico. Our politicians (both parties) just add lip service to this crisis, with no real solutions. China's and India's consumption is going to continue to skyrocket. And it seems to me a lot of the oil men in our country don't give a rat's ass it the United State's security is at risk.

And, IMO, one of the biggies is the attitude of our citizens. Oh, it'll go down ... can't be that high forever. AND, we as Americans have a God-given right to cheap oil. Those days are over.

[Red50Go]

There's no way you can justify oil prices doubling in the past year. Not even supply & demand alone can have that effect. There are several factors that have come together in the "pefect storm" scenario.

1) Higher demand from Asia
2) Valuation of the U.S. Dollar
3) Credit crisis in the U.S. (which puts further pressure on the dollar)
4) Summer driving season (part of #1)

Once the dollar gets moving back to normal valuations versus other currencies, the price of oil should correct back to long-term trendlines of $70-$80 per barrel.

If the Treasury Dept and the Federal Reserve would get together and conduct Open Market Operations and sell more Treasury Bonds, while at the same time making comments that the purpose is to stabilize the dollar, things would turn around rapidly in the oil markets.

There is no credit shortage out there. It's that people are afraid to use that credit. The value of the dollar is down not only because of low interest rates, but also there is too much credit. Soak up that credit (sell them Treasuries) and the dollar rises. Raising the Fed Funds rate would also help.

The key is that these agencies need to communicate the purpose of what they are doing.

Excellent post. But...IF is a big word. And if our goal is to devalue the dollar (the Fed calls it making the dollar more competitive w/ world economies) to increase exports etc, then high gas/oil prices are here to stay, as part of a huge fundamental shift aside from supply/demand. I also think the war on terror deserves a big mention on your list. We are at war alright, and as Bin Laden said from the outset (by attacking the symbol of our wealth) the war is more economical than military. And guess who controls prices? Hey they have a war to fund too right? And if I can make a 3rd point, to me the cornerstone of true fiscal conservatism (and strong dollar) is the reduction or elimination of national debt. Absolutely nothing leads me to believe we are on that path.

[02teleprograd]

stop speculating! Your making gas go up.

go away:sour:

[TigerCoach]

Good post, Red50Go. Bin Laden said years ago that to really attack the U.S., you need to attack us economically. He started by attacking the world's greatest financial center, The World Trade Center, which led to detioration in the world's greatest stock markets.

I don't know if the goal of the Federal Reserve is to make the dollar more competitive for exports, but it is certainly a result of trying to jump-start the economy with lower interest rates. Personally, I think they should raise the Fed Funds rate by 0.25% as a psychological move that will get Americans more confident that the dollar is rising. I listen to a lot of smart people who feel that now is the time to invest in the U.S. dollar since they expect a rise in value over the next couple years. Problem is, consumer spending (which makes up about 70% of GDP) is falling due to lack of confidence and direction in our economy. This I blame on President Bush and Ben Bernanke. We need strong leadership in the economy. There is plenty of credit and there is tons of cash on the sidelines right now. People just aren't sure about the future, thus they aren't going to spend it.

Just like football, mental confidence goes a long ways.