Oil is traded in US dollars. The weak dollar is now at $1.60 per Euro. If
the dollar was strong and at $1.00 per Euro (which is what the projected
exchange rate was when the Euro was adopted) a barrel of oil would be a bit
less than $80 per barrel now.
$124/bbl divided by $1.60 per Euro is 77.5 Euros/bbl. Hence at $1.00 per
Euro oil would be $77.50/bbl.
I was involved in negotiating a contract with a German firm supplying
controls to my former employer. The Euro was just about to be adopted and
in fact by the time the negotiations were completed it had been adopted.
There was much discussion as to how to handle the exchange rate
fluctuations. It was projected for at least the next 5 years that the
exchange rate would vary between $0.95 and $1.05 per Euro.
If you are looking for someone to blame for the high oil prices you can look
no further that the Congress and Executive branch over the last 40 years
which has engaged in huge deficit spending and running up the national debt
which has now come home to roost with a very much weakened US dollar.
No different than you and I. Keep running up huge debts and sooner or later
the bill has to be paid. In international currency there is no Chapter 11
or Chapter 7 (I think) bankruptcy to bail you out. Your currency just tanks
on the international market.
Interestingly there has been little or no discussion in this election year
from the candidates about the national debt or the weak dollar. I guess
it's hard for a politician to point the finger at himself!
My thoughts.
Tim
----- Original Message -----
From: <Group44TR7@aol.com>
To: <fot@autox.team.net>
Sent: Wednesday, June 04, 2008 10:43 AM
Subject: [Fot] Oil - Since Triumphs Drip, Its Worth A Minute To Read
> Amici
>
> One of my colleagues and friends is Jim William of WTRG Economics
> (_www.wtrg.com_ (http://www.wtrg.com) ). Jim is one of this countries
> foremost
> experts on oil pricing.
>
> Jim was very surprised when oil prices went soaring above $100.
> There
> is simply not a worldwide demand (or shortage) of oil to justify that
> price.
> Certainly the depreciation of the value of US dollar was a factor, but it
> alone was not a good explanation why oil was above even $60 per barrel.
> Now an
> explanation is emerging that may impact many of you.
>
> Apparently, the increase in prices are due to more pension and
> investment fund investing in the commodities market. Yup, your very own
> investment
> and pension fund may have contracted to buy oil at $130 per barrel. These
> funds
> now are holding about 1/3 of the commodity paper for oil futures when they
> previous held virtually none.
>
> If you think about what the recession is going to do to the demand
> for oil, these funds are in a high risk position. So you might want to
> check
> where your investment fund has its money; apparently even some of the
> large
> public employee pension funds have taken positions. Seems like the
> investment firms
> debacle in mortgages is about to be followed by a debacle in oil futures.
> Of
> course, it their investors moneys.
>
> Jim had just finished an interview with Fox Business News this
> morning on this very subject, so if you watch the chanel you may hear him
> in person.
> Not a big Fox fan, but this time they have a real expert.
>
> Cary
>
>
>
>
>
>
>
> **************Get trade secrets for amazing burgers. Watch "Cooking with
> Tyler Florence" on AOL Food.
> (http://food.aol.com/tyler-florence?video=4?&NCID=aolfod00030000000002)
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