Oil Doesn't Cost More; The Dollar is Worth Less

[schola]

Me thinks the chart pretty much says it all on this one. If you price oil in ounces of gold instead of dollars, the price has stayed completely FLAT since 2001 at least.

Maybe Ron Paul Was Right - thedailygreen.com

Oil and everything else have risen in price because the Federal Reserve is over inflating the money supply.

Another graph:

http://www.runtogold.com/Run_To_Gold...008-01-02c.png

[Dan.Linehan]

Yep, exactly right.

Hey, have you seen the new United States $2 coin?

[Trezker]

I think it's ridiculous that Americans complain about fuel prices.

If you look at Sweden you can see how lucky you are. We have a huge tax on gasoline because we think it's bad for the environment. We've had it for a long time, long before he european union started thinking about environmental issues.

Now that they want o do something for the environment, they demand that we do even more even though we've done so much it costs an order of magnitude more for us to do as much as they ask.

So there's a suggestion that we double the price of gas to force less road transports. Can you imagine what this would do to people who take the car to work every day because they have no other option? I think it's insane.

[Brutha]

Yep, exactly right.

Hey, have you seen the new United States $2 coin?!

Even in Europe Oil is more expensive than a few years ago.
It clearly isn't all about the dollar.
Natural ressources have become more expensive over the last years because of growing demand.

[escapee]

I would say that the recent price hike in oil is mostly due to weakening dollars - monetary excess ( "inflation" rather than "price increase" due to real supply and demand concern). If the dollars is somehow strengthened to the level of gold you would see the price of oil dipping significantly. Of course, when we're hit with real shortage of oil which will probably happen in decades from now, there will be a massive price increase or a combination of "price increase" and "inflation" from monetary excess.


Inflation 101
Why does money have value?

This inflation of the currency causes people to want to get rid of their money as quickly as possible. Inflation, and the rational way citizens react to it, causes great misery for an economy.

The key cause of inflation is increases in the supply of money. Inflation can occur for other reasons. If a natural disaster destroyed stores but left banks intact, we’d expect to see an immediate rise in prices, as goods are now scarce relative to money. These kinds of situations are rare. For the most part inflation is caused when the money supply rises faster than the supply of other goods and services.

So to answer your question, money has value because people believe that they will be able to exchange their money for goods and services in the future. This belief will persist so long as people do not fear future inflation. To avoid inflation, the government must ensure that the money supply does not increase too quickly.

[WanderingOak]

In the past, the Saudi Arabian gov't was able to lower the price of oil by increasing output. Now, however, they hem and haw and say that there is no increased demand (when there is increased demand from countries such as China) when asked to do so. I have a feeling that Saudi oil production has peaked, the same way American oil peaked back in the 1970's. In other words, higher oil prices are here to stay, and as other countries begin to peak, we may soon have shortages...

[Brutha]

If the dollars is somehow strengthened to the level of gold you would see the price of oil dipping significantly.

If dollars where somehow strengthed to the level of oil or copper you wouldn't see a price increase either.
Ressource prices are often linked to each other.

When natural resources in general become more expensive it clear that you don't see a price increase when you compare natural resources with each other.

To see whether the dollar is at fault you should compare the dollar with other currencies.
Oil is also becoming more expensive in Europe when calculated in Euro.

[escapee]

To see whether the dollar is at fault you should compare the dollar with other currencies. Oil is also becoming more expensive in Europe when calculated in Euro.

That's because US ( the dollars - the world reserve currency ) is exporting inflation worldwide via rapid expansion of money supply ( thanks to enormous deficit and debt of US).

[ogrekilleat]

I agree, Trezker

[Spartan]

The US is using monetry expansion in an attempt to increase consumption and investment, and hence GDP. The US is in a recession, and if people started spending their rebates etc instead of saving them, the US might get out of it. Once the US is out of its recession, investment will increase and hence the dollar will strengthen.

[garentee]

Not so sure that spending a small rebate will jump start an economy. Economy is a state of mind as well as a numbers game. It is the confidence that money will be coming in to replace that which you just spent.

[Spartan]

Originally Posted by garentee

Not so sure that spending a small rebate will jump start an economy. Economy is a state of mind as well as a numbers game. It is the confidence that money will be coming in to replace that which you just spent.

That mindset on a mass scale is what's preventing it from working. Agents have lost all confidence in the economy.

[Ponce]

As a survivalist I have been getting ready for a long time for what I knew was going to happen.........one of my preparations was the purchase of silver and gold.

At this time I am buying my gas with silver rounds where my price per gallon is of 0.87-0.91 cents .

I also have two scooters that gives me 75 MPG at 65 MPH.

Like the station owner told me "Ponce? you will always be the first one in line to buy my gas"..........looks to me that he likes my silver more than their fiat.

There will be a time when the price of gas will stop going up but the price of sillver will not, so that one of this day I will purchase my gas for 0.12 cents per gallon.

"To be ready is not"... Ponce But I sure as hell can try.

[schola]

Originally Posted by Brutha

Even in Europe Oil is more expensive than a few years ago.
It clearly isn't all about the dollar.
Natural ressources have become more expensive over the last years because of growing demand.

Your European central banks have been inflating the heck out of the Euro as well.

Also, oil is still bought and sold on the market in Dollars, not Euros.

You pay for your gas in Euros at your local gas station, but you are still paying the higher price for the inflated dollar.

Originally Posted by Brutha

Natural ressources have become more expensive over the last years because of growing demand.

Not a chance. There are other factors at play here.

You are saying that gold has quadrupled in price since 2001 (much like oil) because of higher demand? Silver too?

Gold is hardly subject to supply and demand. The very fact that gold has had a stable price...er, value, for thousands of years is why it was historically so popular as as standard for money.

[Amadeus]

You are right and wrong. The declining dollar has had a little influence in the rising cost of oil but it has more to do with supply and demand. When George Bush took office oil was around $20 a barrel and now it is around $120. That is a 600% percent increase. If what you were suggestion is true than milk would cost $12 a gallon, cars would cost $120,000, and every home would cost over a million.

[escapee]

The declining dollar has had a little influence in the rising cost of oil but it has more to do with supply and demand.

Sure

If the supply of money goes through the roof and the supply of precious good remains constant we will have inflation. The reason is we now have thousands of millionaires/billionaires ( dollar holders ) all over the world trying to outbid each other to either buy or hoard the produced precious goods like black gold (oil) and yellow gold. The pain of inflation has to be felt somewhere, and it's the middle class.

That is a 600% percent increase. If what you were suggestion is true than milk would cost $12 a gallon, cars would cost $120,000, and every home would cost over a million.

It depends on the imports ( eg : energy and wheat ) of US, how precious are the goods and how much the produced goods are tied to energy usage. We can have extreme bull and bear market in a screwed up economy.

[Dan.Linehan]

Originally Posted by Brutha

Oil is also becoming more expensive in Europe when calculated in Euro.

How much more expensive though? Since 2003 the price has gone from $30 / barrel to $120 in US Dollars. That's four times as expensive.

Was there that much of a change when the price is calculated in Euros?

[schola]

Originally Posted by Amadeus

You are right and wrong. The declining dollar has had a little influence in the rising cost of oil but it has more to do with supply and demand.

There are other factors at play too. Turmoil in the middle east. China's growing economy. But they don't play as big a role as the government wants us to think.

Inflation of the dollar by the Federal Reserve is the biggest factor.

The reason why OPEC won't increase production isn't because they like yanking our chain. It is because they know the price increase is from a weak dollar, not increased demand.

Weak dollar caused oil's rise, OPEC president says | Gold Anti-Trust Action Committee

When George Bush took office oil was around $20 a barrel and now it is around $120. That is a 600% percent increase. If what you were suggestion is true than milk would cost $12 a gallon, cars would cost $120,000, and every home would cost over a million.

Inflation is not the increase in prices of things. Just because a loaf of bread doesn't cost 4 times as much doesn't mean the Fed hasn't been inflating the dollar.

It is the increase in money supply. It is happening. There is no doubt about that.

Precious metals like gold are always the first to demonstrate a price movement during an inflationary or deflationary episode. They are so accurate it's almost scary.

I suppose it takes a while longer to effect consumer products and food, but it is happening. Have you not gone grocery shopping lately?

Hyperinflation in 1923 Germany

By the end of the war, the amount of money in circulation had increased four-fold. In view of this, the extent of inflation was less than one might have expected. The consumer price index had risen 140% by December 1918. This was equal to the inflation during the same time in England, a little more than in the United States, but less than in France. Yet the floating debt of the Reichsbank had increased from 3 billion to 55 billion marks!

Why was inflation kept within bounds? For the same reason that it got off to a slow start in the Unites States during World War II. Necessities were rationed and luxury goods were not easily available. Millions of men were at the front and not in the market for goods. Civilians worked hard and had little leisure for spending. People saved money against peace time, and in some cases to evade taxes. But the fuel for inflation was accumulating in the form of vast hoards of money.

[Still Growing]

Originally Posted by Trezker

I think it's ridiculous that Americans complain about fuel prices.

Why, because you pay more? Thats irrelative.

[Dan.Linehan]

America became what it is today because of cheap oil.

A lot of things will be changing now that peak oil has been reached.

[Still Growing]

Reasons for higher gas price....

1. Higher Demand by emerging markets
2. Devalued dollar
3. Higher prices with same % mark up equals larger profits
4. Demand for Decreased Foreign Dependence on oil... US companies can only afford to drill for oil when its over $100 a barrel. Now it is and so the drilling has begun in TX and also with Canada's oil.
5. Futures.... Oil is not sold direct but through the methods of oil futures. This means that its not today's price on oil but a factored method of selling future oil purchases based upon future forecasts that could cause supply to drop. The fact that the US is in Iraq and talking about Iran as a threat drives oil futures up...

I could go on...

Its not really that complex...

[schola]

Originally Posted by Still Growing

Its not really that complex...

It is very complex. That is why no one really understands what is going on.

[escapee]

At the end of the day, it still comes down to lax monetary policy, China and India would not have registered enormous economic growth if it wasn't for the ez paper dollar. We are having a steroid-enhanced global capitalism. Paper money is the steroid. Once the effect of steroid is gone, it's "payback" time.

China's inflation surged to a nearly 12-year high in February, the government said Tuesday, squeezing exporters and adding to the threat of unrest ahead of the Beijing Olympics.The 8.7 percent rise in the consumer price index over February 2007 was driven by a 23.3 percent jump in food costs, the National Bureau of Statistics reported. Price rises for some individual goods were even more dramatic: Pork was up 63.4 percent and vegetables 46 percent.

China’s inflation jumps to nearly 12-year high - World business - MSNBC.com

Another point is if US and the world was put under strict monetary constraint XX years ago, we would have ( or are forced to) utilized precious resources more efficiently and much earlier ( electric car, air car,solar, nuclear energy and etc ). and there would no Iraq war for paperdollar-oil. That's my guess.