Virginia Beach Home Loans: Deliberate plan by the Bush Administration FED or just coincidence?

Deliberate plan by the Bush Administration FED or just coincidence?

I'm talking about the spike in oil recently... Who'd of guessed? A diabolical plan to increase the cost of oil while a Bush is in the whitehouse...?

Oil is a hedge against inflation. Oil is traded in dollars so when the dollar drops oil becomes a more attractive investment for those trading in foreign currency.

The FED cutting its key rate increases the likelyhood that the value of the dollar will drop. When the value of the dollar drops investors world wide rally around oil and the cost per barrel soars.

The FED Funds rate cuts did not help the consumer, they did not help the housing market and they certainly are not helping the financial markets but oil is doing just fine.

Christopher Ohlsen

37 Boynton Ave

(845) 243-5293 (Office)

(518) 565-0799 (Cell)

www.plattsburghmortgage.net

chris.ohlsen@guaranteedrate.com

 

 

Comment balloon 4 commentsChristopher Ohlsen • May 21 2008 03:27PM

Comments

With record profits quarter after quarter you would think that we could get a break as a consumer, but I don't forsee that happening any time soon.  Ugh!

Posted by Joshua & Kathy Schmidt (ERA Henley Real Estate) almost 10 years ago

Who would have thought it possible!  That really makes lots of sense.  Thanks!

Posted by Dana Couch-Davis, CRS, GRI, ABR, SRES (Kendall Haney Realty Group) almost 10 years ago

Joshua - Yeah exactly... There are several things that are causing the cost of oil to increase but I think that the slahing of the FED Funds rate is at the forefront of causes with regard to why it is spiking so high day after day. It usually takes a couple of months before the affects of a FED Funds rate cut trickle into our economy. This is the result that we have all been waiting for... and there was a lot of slahing going on so we can expect this trend to continue for a while. Another thing that I would like to point out is that gasoline in the US is made from a combination of ethanol (7%) and the "by-product" or "middle" of the barrel of oil. As demand increases in the US and China for Diesel fuels to run manufacturing equipment and jet fuels to run our air liners more barrels are being sold and therefore there is more raw material to make gasoline so the price should actually go down. The terrible price gouging that we are all victim to is a result of a combination of our governement making poor financial decisions and the lack of government oversigt on the oil refineries within the US. A source of energy that is as coveted as gasoline should absolutely be regulated by our government.

Dana - I know right... This is a big surprise for everyone... I wrote this yesterday when oil was $133.00 per barrel and today we are dealing with $135.00 a barrel. There is a dis-connect between the cost per barrel and the cost per gallon of gasoline because of the reasons that I mentioned in my response to Joshua but it really depends on how the media portays it. Refineries and large companies such as Exxon Mobile know that most people believe that the price per gallon of gasoline is directly associated with the cost per barrel of oil and they pricing accordingly with regard to common perception... This is why they are recording record profits and raking us over the coals. The only industry that has benefited directly as a result of the FED's recent decisions is the oil industry!

Posted by Christopher Ohlsen (Credit Werx, LLC.) almost 10 years ago

I believe that all of this run-up in gasoline prices is more due to traders in the commodities markets speculating about where oil prices will go, the declining value of the dollar, the increased demand for more oil in the global markets, and the refusal of those who "own" the oil to pump more of it to meet growing demand. It's also due in part of the failure of many administrations since the 1970s to even deal with it, not just the Bush Administration. We do not have and have not had a viable energy policy in this country to deal with this "crisis."

I do not believe oil should be trading in the commodities market. Oil prices should be the result of supply and demand, and no more. That being said, oil production and gasoline distillation should not be held back just to increase the price. However, the refining capacity in this country is maxed out, and we are now importing gasoline to help meet demand. In addition, there are vast oil reserves in this country and just offshore that are left untouched. Why? Because of the fear of environmental pollution. Yet, oil production does very little damage to the environment.

Finally, the devaluation of the dollar is having an impact on oil prices. This country has had a large trade imbalance over the years (more goods coming in that going out). This threatens job security in the U.S. as American made goods are priced higher than foreign goods in part due to higher living wages. I believe that the Bush Administration is deliberately letting the value of the dollar fall to stem the growing trade imbalance. The increase in the cost of foreign goods to be more in line with the price  of American goods helps to increase its exportation, and thereby help to maintain a healthy and viable manufacturing labor force. The cost of oil is, unfortunately, negatively impacted by this.

JMHO.

Posted by Lew Corcoran, ASP®, Home Stager & Real Estate Photographer (Scena Home Staging & Decora Photography) almost 10 years ago

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