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Changes in oil prices are not usually that interesting for me, but I am a little dumbfounded by the connections these reporters assume. This story claims that prices are rising–now to about $82–because the stock market has boosted consumer confidence and the demand for oil products will rise as a result.

Another thing pushing prices up is the falling value of the dollar. Americans import so much oil that a falling dollar makes oil and gasoline more expensive. Of course, the falling value of the dollar is also adding to consumer confidence because the demand for US exports is going up. OK. In this indirect way the correlation makes sense.

Fine. But what about the effect of higher oil prices on everything else? We have seen it in the states since the 1970’s– Oil prices rise, manufacturing and transportation costs go up, investment and economic growth slow down. It seems to me then,  that as long as investors see oil demand correlated with market confidence, oil is working as a natural counterbalance to both excessive growth and excessive decline. Maybe that is a good thing, eh?

Or maybe some of these connections are suspicious. Maybe consumer confidence is more and more going to allow people to switch to alternative energy sources, at least in the developed world.

(Don’t forget to visit alphainventions.com)

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7 Comments

  1. I think another reason is that the oil is harder and harder to get with the technology available now. So the costs of getting the oil make the price of it higher.
    I definitely support other alternative energy sources, which not only can help solve the oil energy crisis but also could help protect the environment.
    While the oil in this planet is limited,(although it is generating, we are using much more), we generation have to witness the transaction from oil based energy to another renewable energy, whatever it is.

  2. from my point of view, normally, when the price increase, the qunantity demand of the oil is decreased, but, in the stock market, when the price increase, the expectation of the oil demand is increased. the increased quantity of the oil demand is not the consumption, but is a way of speculative. so the increased confidence represent people’s strong expectation about the oil demand, also the strong confidence for the world’s economy.

  3. Yesterday I’ve read on a periodical about the transition from weaponary Uranium to power generating Uranium that introduced by U.S..And I thought that might be a excellent idea to get new energy sources.I mean Exchange energy for more peace,what a great progress we human beings made!On the other side, I still believe that the oil price,which was tight-bonded with USD,is demand driven,as it still follows the classical traits,higher demand push up the external price.The biggest comsumption end for oil,in my mind,is transportation.Once we got more sophiscated public tranporting system(both qualitatively and quantitively)the need for oil will be go striaght down.

  4. I think another reason is the demand of cars and personality of american.The high oil prices have angered American people, but no one seems to be driving less.As I know now there are more than 200 million cars in the United States. In Los Angeles there evidently are more registered cars than people. Some families spend more on their monthly car payments than on their home mortgage. They dream of cars as they dream of lovers.Americans have always cherished personal freedom and mobility, rugged individualism and masculine force. so the increasing oil price is inevitable.

  5. Well, how to see. Um, I read today’ newspaper,said America doesn’t allow China company to buy a Gold mine where there is 60km distance from TOP GUN, an airforce trainning school.The reason is that foreigners will threaten American security. But there are lots of forigen company, which have same situation to this Chinese company, working on this area. In fact, it’s no hard to link it with trade friction between America and China recently. Ok, go back to this article. I don’t think the Oil market can operate without American goverment intervetion by “a falling dollar makes oil and gasoline expensive” Oil, the main resource of industry, can be a tool to control any market around world. Who can deny this oil price increasing will not be primacord of next sino-American trade conflict?

  6. I remember that the price of oil soared during the period of Gulf War. But the cause it is totally different from the case that we talk about today. The resouces were so limiting after the war,that is, quantity supply fell dramatically and that led to an increase in price in oil. Today, as you said, depreciatory dollars and the high demand for oil are main causes for it. I have to say that in the present-day society, more and more private cars and factories need oil eagerly.
    It is obviously that investment is related to business conidence.If businesses are very confident about the future and expect consumer demand to rise, then they are willing to invest such items to increase potential output and productivity. By the way, interest rates,national income and technological also can change investment.

  7. The stock market boosted consumers’ confidencen,and then the higher confidence would cause the inflation,thus the price of oil rised besides the devaluation of US dollar causing by the inflation also rise the price up.In this situation,we need to consider keynesian theory,so the government should come out and adjust the price of oil for a better market.


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