10/27/2004

Stocks surge as crude price drops

Since January of this year, the S&P has been consistently volitile with minimal growth. Many factors have contributed to the pessimism in the market. One of the greatest factors has been oil prices. Oil prices have struck the pockets of every oil consumer in the world. Today, the 27th of October news arose regarding a surplus in oil inventories. This news came shortly after Opec suggested America tap its strategic oil supply to lessen the burden of oil prices by bolstering supply. In a modest reaction to the news of the surplus indexes jumped upward with a higher then usual volume, and a much higher then usual gain.
With oil prices going up, complimentary goods such as automobiles should go down. With many american owning larger vehichles such as trucks, and suvs, one might think that resale values will start to decline as the price of owning one increases greatly. Since the begining of this year, oil prices have increased over sixty percent to over fifty two dollars a barrell. This is a tremendouse increase in price in a reletivly short period of time.
Now, oil is an less elastic good then say orange juice, and the price hasn't decreased oil demand substantially; however, if the rate of oil price hikes continue consumers are going to see lower resale value amongst their automobiles and wealth in general.
Price hiking that has been encountered this year with oil prices is suspiciouse. Prices are increasing at an alarming rate with no decrease in supply. The hike in price without a justified cut in supply is rather perplexing. Why would the government allow an increase in prices without the justified reduced supply?
Perhaps the vast oil fields world wide are being used up an alarming rate, causing government officials to raise rates to a point where demand falls. If this is the case, how much oil is really left? How long before the oil supply is exhausted? How much will my car or truck be worth in a month from now?
www.msnbc.msn.com/id/3683270/

4 comments:

John West said...

Oil contiues to dominate this forum and I believe that this country is heading in a collision course due to such factors as an oil crisis. What happens when oil gets so high that the average person can no longer afford to go to work. Aren't we almost already there. Take for instance those that only make menial wages and barely scrape to get by. How are they going to continually pay more at the pump and continue to put food on the table. Oil must come down to a reasonable level. This $50/barrel nonsense has long since been exhausted.

Bryce Larkin said...

I agree that with this oil price increasing there will be less large car buying. More car manufactures are producing cars with better fuel economy. I believe this will lower the price the larger cars that consume high volumes of gas tremendously.

Bryce Larkin said...

The high price in oil has lowered the demand for oil. In talking with my brother-in-law that drives for Chevron. He said that he make fewer trips to gas stations because people are buying less gas. I believe the market will determine a price even if right now the demand is lower and the price is still rising.

Maudi said...

People are feeling the same crunch that was felt in the 70's, when fuel prices were so high that people stopped buying gas. This is a classic example of what happens when the price of something is to high and people stop buying it then becomes a surplus. Thus the price must drop in order for the people to buy again.