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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (33023)	4/13/2008 4:19:16 AM
From: elmatador	Respond to of 217749

At $112 a barrel, we must save every drop we can It is just possible that the sharp pain we feel when we fill up the car might ease a little through the summer. The reason is that there are some signs, small ones, that the present level of oil prices is pegging back demand. Tax apart, there are two elements determining petrol costs. One is the crude oil price; the other exchange rates. There is a further tweak with diesel prices because of the lack of refinery capacity and the boom in diesel cars, but that is a separate issue. The price of crude hit an all-time high on Wednesday, reaching $112 a barrel in New York, so might it not go higher still? Of course – but at this sort of level people are starting to figure out how to use less of the stuff. The Bank Credit Analyst team points out that US motorists have cut the number of miles they are driving this year, something that has not happened since 1980, though the decline is not as sharp as then. They are also switching to smaller cars, although this takes a while to feed through into lower total consumption. Something else seems to be happening in the rest of the developed world, for overall oil consumption has fallen this year, though again not yet nearly as much as it did in the early 1980s. Consumption has not gone down in the developing world, though, and given growth prospects there, it seems unlikely to do so. But at this price there is a huge scramble to switch to cheaper fuels for heating and power generation, as well as pressure to figure out ways not to use the car. Exchange rates? Well, the pound has stuck close to $2 and that is relatively strong by historic standards. Unfortunately, since the dollar is so weak, that does not help us as much as it should. One of the reasons why the dollar price of oil is so high is that this reflects the weakness of the currency. So we need both the dollar and sterling to pull up a bit. The chances of that? There is the possibility of a true collapse of the dollar, which would be serious for the whole world economy, not just the oil price, but at some stage currency markets do turn. In any case, sterling has fallen quite a lot in recent weeks, particularly against the euro, and it is possible that trend has more or less run its course. Eventually an oil price above $100 will boost supply, but that is a long, slow business and meanwhile the demand from the developing world will continue to climb. So do not expect any plunge in prices. But at some stage every market turns, and even a plateau at the present level would be very welcome. independent.co.uk