Friday, November 18, 2011

Why $100 Oil Will Tank The Economy

by Josh Saunders, Great Pacific Trading Company

Oil continues to mirror the run up in the stock market. The financial cheerleaders continue to talk the markets higher all the while failing to mention that oil has snuck back to nearly $100 a barrel. To make matters worse, Brent Crude is trading at $112 a barrel. As America enters the holiday season the pressure is going to be felt not only at the pump, but will also impact the kiddo’s present pile under the Christmas tree.

Driving to get grandma in Omaha may be a little expensive. Some families may choose to have Grandma attend the Christmas morning gift opening via Skype. Instead of paying those high gas prices and airline fuel surcharges, grandma can see the excitement on her grand kids faces on the webcam. Nothing really says family closeness and Merry Christmas like a cyber hug. At least it will be easier to hide the disappointment of receiving another pair of hand knitted socks instead of a new iPhone 4S.

The fundamentals for a bull case in oil continue to show an up trend. As the world population continues to grow, more citizens are moving up the social ladder and using items that require oil or its by-products. In China and India alone the increase in the net population will be nearly 20 million people this year. As these two economies continue to grow into affluence they will buy and use more and more oil.

Last year the people of China purchased 13.8 million cars. Between India and China they add approximately 95,000 new cars a day to the worlds roads. This is an ever increasing amount of oil consuming vehicles battling for a finite supply of oil. The world pumps 88 million barrels a day and some would say this figure has peaked.

crude oil price chart December 2012

Simple supply and demand would dictate that a finite supply with rapidly increasing demand should only increase the price of oil. While we may see some trading volatility, the trend for oil is going to be up. The only headline that could stop this rising trend would be some magic source of renewable energy and a way to effectively store it.

Well, GM has sold 5,000 Chevy Volts, but I think you get idea. As the holidays roll around, high oil prices will put a clamp on shoppers wallets. For an economy that derives nearly 70% of its GDP from consumer spending, this does not bode well going forward. Rising oil prices will slash any hope of the consumer lifting the stagnate economy.

There could potential be a small bump in holiday sales, but it will come only with a jump in consumer credit. We are talking about black Friday and cyber Monday deals here!

Fellow commodity junkie and personal friend Josh Saunders is VP of Northern California Operations at Great Pacific Wealth Management.

Twitter- @saundezj

Email- Josh@gptc.com

22 comments:

Sara said...

I really appreciate your post and you explain each and every point very well. Thanks for sharing this information. And I’ll love to read your next post too. Regards ncdex
mcx gold

lakshmi said...

Bazarclicks is an Investment Advisory Company which basically provides
recommendations for Stocks- Cash and F&O traded in NSE & BSE, commodities including bullions, metals traded in MCX.
We provide recommendations Live through SMS.Our SMS facility is a very efficient system ensuring the instant delivery of
Message without any loss of time. So, the clients get adequate time To enter the trade.

For free trial visit www.bazarclicks.com
call us @ 080-32999129, +91-9632541591,
Subscribe us @ bazar-clicks.blogspot.com

Barkha said...

It was a nice post explaining the effect of rising or falling oil prices on economy. Visitors can subscribe to a free newsletter for Commodity market updates and Prediction by clicking on the below link.

Commodity Tips

Equity Tips said...

The post is written in very a good manner and it entails many useful information for me. I appreciated what you have done here. I am always searching for informative information like this. Thanks for sharing with us.

Equity Tips said...

Hi, This is a good post, indeed a great job. You must have done good research for the work, i appreciate your efforts. Looking for more updates from your side. Thanks

Free Stock Tips For Intraday

Commodity Tips said...

Nice blog good information about market I really appreciate your post and you explain each and every point very well.Thanks for sharing this information. And I will love to read your next post too and most welcome MCX Gold Today MCX Silver Today

Thank and Regards

MCX Crude Oil Today

MCX India Tips said...

What a great idea I really liked it.....
MCX Updates

Pawan said...

Really its very good information for commmodity. I like it very much.

Ravi yadav said...

Thanks for the info, it was really helpful. I'll surely visit back again later.He is one of the top blogger on the internet right now.

SWATI said...

It was a very nice idea! Just wanna say thank you for the information you have shared. Just continue writing this kind of post. I will be your loyal reader. Thanks again. and welcome to my Blog: Intraday

stock-trade-tips.blogspot.com said...

It's nice post for the tipic, thanks for it I always like and search such topics and everything connected to them. I really appreciate it.

Sara said...

You have very nice site and will really helpful for everyone. And I will love to read your next post too. This blog as usual was educational thanks for share such good information... regards copper updates, mcx gold tips

Free Intraday Stock Tips said...

It seems to be a rocking blog!!

Keep Bloging!!

Regards: NCDEX

Crude Updates

MCX Tips said...

This post is very reliable and beneficial to understand various Commodity items, Intraday Tips

MCX Tips Trend Blog said...

Great information provided on your blog. The info provided here is really new and very much valuable. It is the power of your content which attract me again and again toward your blog.

I will be glad if you visit on my blog MCX Gold Tips

Sara said...

This is the great piece of information. Do keep us update with some more great information. Thanks for sharing this.....copper updates

Free Intraday Stock Tips said...

I read your post on NCDEX. That was amazing. Your thought processing is wonderful.
The way you tell the thing is awesome. They are inspiring and helpful.

Thank With Regards: MCX Commodity Tips

Japanese Used Cars said...
This comment has been removed by the author.
saruwatari riku said...

The information which I found here regarding Japanese used cars is very helpful and I like to share a useful Japanese Used Car website here.いすゞ車買取

Mcx Tips said...

This is the perfect blog for anyone who wants to know about this topic. The article is nice and its pleasant to read. I have known very important things over here. I admire the valuable advice you make available in your expertly written content. I want to thank you for this informative read; I really appreciate sharing this great.Mcx Tips

kavin smith said...
This comment has been removed by the author.
Tina Roy said...

Thanks to blog author for providing this important and useful information on commodity. These information will be profitable for investors who want to earn big profits through share market.
Nifty Tips on mobile by SMS

Most Popular Articles This Month