Crude prices nearing $90 for the first time in two years, some economists and producers are getting nervous, according to assistant managing editor WorldWatch First Published: November 8, 2010.
Crude is currently trading around $86 a barrel. Prices have not topped $90 in more than two years. But now that the US the Federal Reserve has made its latest round of quantitative easing official, this attempt to control the dollar may have a negative reaction on crude, some fear that crude at $90 is likely in the not-so-distant future.
The dollar has weakened a lot leading up to the US Fed announcing its $600 billion plan to buy more Treasury bonds. And many experts think the greenback may continue to fall. That would put more pressure on oil prices, which are priced in dollars.
The real question is how much weaker can the US force the dollar to go, particularly relative to Europe. That could get oil beyond $90 sometime soon, and that is be bad news for consumers , who are still reluctant to spend at a time when the economy remains fragile.
Rising energy prices are often viewed as a so-called tax on the consumer.People may have to pay more to fuel up their cars and heat their homes.
Higher oil prices will also jeopardize the recovery of most Nations and in particular the crude producers as demand will decline further, estimates place a drop in demand for this year by 16%, but this figure may continue to rise if the crude prices are not kept around the $76 a barrel.
Shares of Ford (F, Fortune 500) are near a six-year high. GM has returned to profitability and is scheduled to go public again next week. Even Chrysler, which reported a loss Monday, is pointing to better times ahead.
So the last thing any of these companies want is sticker shock at the gas pump, however this is about to happen causing these and other automakers to enter a second recession.
The big issue is about consumer confidence. What you pay for petrol (gas in US) is a very prominent cost. If oil goes over $90, you will see more concerns about consumer spending-
Even if oil does blow past $90 and starts heading toward $100, this will cause consumers to be nervous simply because they've already lived through $100 oil before.
Oil has a long way to go before it reaches the all-time highs of more than $140 a barrel back in July 2008. With that in mind, oil at $90 -- or even $100 -- will be a major pain for consumers.
However, if rising oil prices start leading to higher consumer prices , consumers may start to change their behavior to conserve cash, and find other energy sources.
If oil keeps going higher, people will curb their driving. The prices will become a natural inhibitor to demand. rising oil prices are already having an impact and consumers are being more cautious about what they spend.
Nobody is paying attention to oil and that investors banking on better times ahead for retailers may be in for a shock.People may be spending more at the pump than at restaurants and on shopping over the holidays.The increase in energy prices is diverting money that might be spent elsewhere.
Stocks and commodities prices fell sharply Friday as investors confirmed that China will slow down its surging economy.
