The latter part of 2008 is not the best times we will remember. Global recession issues started to crop up months back and while many were bracing themselves on the effects of these factors, it seems that figures are now the best thing to justify that the world is truly in recession. Without significant numbers in the export side, you can just imagine how much the impact would be and why there is a trade deficit at this point.
With less imports resulting from poor markets and declining confidence in the economies, the United States had reported a trade deficit which is sending a lot of shivers to people who are following the potential outcome of these recession problems. Job layoffs have also risen and put them altogether and you have a world that is scrambling to make ends meet and try to survive this debacle that is here.
The Commerce Department reported Thursday that the trade deficit rose to $57.2 billion October, 1.1 percent higher than the September imbalance of $56.6 billion. Analysts expected the deficit to decline to $53.5 billion on lower oil prices.
So with these fact evident, it looks like we should be prepared for worst things ahead. No one wants to be in this situation but apparently we don’t have much of a choice but to go with the flow.
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[tags]global_recession, significant_numbers, trade_deficit, job_layoffs, commerce_department, oil_prices, united_states, confidence[/tags]
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While many of us are heaving a sigh of relief on the recent events that saw oil prices going below $115, it is still far from normalizing to the prices that we had enjoyed some months back. Apparently a lot of political issues have been the cause and bordering nation disputes have likewise made oil prices to where it is today.
There are two points for discussion here. Let me enumerate them regarding the current oil price frenzy.
Russia’s invasion of Georgia
While we are celebrating, turn around and look at the oil price in the market. They are not slowly spiking up and a lot of it is due to the current conflict between Russia and Georgia. For the record, Russia is one of the contributing nations towards oil needs in the world and apparently they are now in semi-war with the United States.
With that said, we are slowly getting the feelers. The oil prices are spiking up in preparation for another crisis and if the dispute with Russia is not settled, we may just see another round of oil price increases. Something we do not like but a reality we must face.
Who are responsible for Oil Price?
Oil companies command prices but not depending on supply but more on how they negotiate through contracts. Similar to business, negotiations and set prices are agreed upon depending on how much and how many barrels of oil will be exported from one destination to another.
Unlike what most of us think, oil price hikes are not always signs of oil shortage. Sometimes you have to audit the oil companies closely to get the real score. Sad to say, this is a reality and it is something that we can say that has originated from our own selfish professions in depicting business and focusing on making money.
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[tags]oil_price_hikes, current_oil_price, business_negotiations, oil_shortage, oil_companies, oil_prices, professions, invasion, conflict, russia, making_money, contracts[/tags]
Well, it appears as if the oil energy crisis is not going to go down in history without a fight from some people in order to change things. Rather than changing towards renewable energy sources or at the very least away from diminishing resources to ones that are still available in plenty (i.e. uranium and nuclear power), it appears as if the governments of the developed world (and in particular the government of the United States), is going to hitch the near future to the goal of bringing oil prices down.
According to many analysts of the oil futures market, there is a huge amount of speculation in oil prices that is accounting for more than half of the current price of oil. Specifically, the number I hear thrown around a lot is 60%.
Well, for the sake of argument let’s assume that the price of oil is $140 a barrel (at the time of writing the NYMEX future was $135.77). Taking away 60% of that price would leave oil at $56 a barrel, a price that is still extremely expensive when compared with prices in the early part of this decade that were below $40 a barrel. While $56 is still extremely good compared to the prices of today, it is important to realize that the price of oil is still rising even according to the most optimistic forecasts and that doing things like telecommuting is still going to be necessary in the future.
The stock market has risen back from the grave despite the continued problems of the economy lead by the celebrated rise of oil prices which is forecasted to reach as high as $6 and at least $128 per barrel. Foreclosures are also increasing and with these two factors for consideration, you have to think, how on earth can the stock market get better?
Apparently, investors and brokers are expecting a better economic run later this year and they are positioning themselves to be ready for it. Risky? Perhaps. But the thing is you have to live with risk.
Bad news has been in the headlines for the past months and people seem to be numb to it already. In fact, they are no longer considered to be factors in business decisions today.
With these things in mind, it is indeed becoming a wacky world as ever. As for the stocks improving, that is a good sign. Hopefully it rubs off on the other problems we have today.
Among retailers reporting solid May results, Wal-Mart Stores Inc. said sales at stores open at least a year rose as consumers sought bargains. Wal-Mart shares rose $2.12, or 3.7 percent, to $59.80.
Subodh Kumar, global investment strategist at Subodh Kumar & Assoc. in Toronto, said the jobs figures and the Verizon Wireless deal offer some investors reassurance about the health of the economy.
“It looks like the U.S. is not in recession but, I would say, tepid growth,” Kumar said.
(Source) Yahoo News
Well, anyone that had held out hopes for oil prices coming back down in the near future is likely not that encouraged by recent news coming out of the market. With oil futures exceeding $127 for the first time in history, many of the different players involved have started creating projections for oil that do not look good for anyone interested in utilizing it as a long term product.
According to Goldman Sachs, they have raised their oil estimates of West Texas Intermediate oil to $141 a barrel in the second half of 2008. The previous estimate of $107 had to be revamped upward by a significant amount after oil prices rose a lot faster than the company had been forecasting. Furthermore, they are now also projecting that within the next half year to two years, oil prices will reach $200 a barrel. One can only imagine what gas prices will be like at the pumps when oil becomes that expensive.
Ultimately, what the most recent oil trends show is that people predicting that new deposits would eventually bring oil prices down are incorrect. Oil prices are never going to come back down at this rate, which means that people need to change their plans, investments and forecasts over to the assumption that oil prices are not only going to keep increasing, but that the rate of increase is likely to get higher as well over the course of time.
