Jul
Lowering The Price Of Oil Through Supply Increases
Posted by jerry as finance
I have read and heard repeatedly by analysts, economists and politicians that say “drilling for oil is not going to do a thing for oil prices now”, mostly in response to the latest actions by George W Bush to allow off-shore drilling again.
I understand the logic behind those comments. Drilling for oil now means that we may have more supply in 10 years, because of the time to actually find where it is, and the infrastructure build duration. But, that assumes the price of oil is simply a matter of supply and demand. We have more demand than we have supply.As much as many people don’t want to hear it, we DO have enough supply, on a daily basis at least. It’s true that we are burning through a resource that will one day be completely gone, but we’re not there yet.
Apr
Iran’s decision to trade oil in Euros instead of dollars
Posted by jerry as finance, politics
Iran announced that it is now trading oil Euros instead of dollars. The weakness in the dollar is cited as a primary reason, though it is understood that the growing tension between the US and Iran is probably a key factor as well.
The general reaction I have seen is: “Holy Crap!”. But, I have to wonder: what is the real impact of doing such a thing, from any side? Oil is a fungible commodity. Currencies are traded on the market. Oil sold in Euros is still convertable to the current exchange rate to dollars. So, someone who wants to buy a million barrels of oil from Iran has to convert $120M to 75M Euro before conducting the transaction? That does sound grave. I suppose the net effect is that Iran will be holding $80B less US dollars per year. Since NO US institution can transact business with the Iran anyhow, Iran is most likely having to exchange them for Euros, Yen or some other currency before doing anything meaningful with it anyhow.
I suspect the risk is that the whole oil market will eventually follow suit. With the recent behavior of the US, that seems likely, but I still have to wonder: will we care?
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