If FED increases the rates OIL Prices will Fall?? (1 Viewer)

[APSaintsFan]

http://money.cnn.com/2008/04/29/news/economy/oil_dollar/index.htm?cnn=yes

I did not realize this. I know I am not real good with the economics part of the world but I did not know this.

AP

 

[blackadder]

http://money.cnn.com/2008/04/29/news/economy/oil_dollar/index.htm?cnn=yes

I did not realize this. I know I am not real good with the economics part of the world but I did not know this.

AP

The Fed will not increase rates for awhile.

The general idea is that in the current climate increased rates would deepen the slowdown and reduce demand for energy...

 

[CHI-TOWNSAINT]

Thanks for posting...I didn't know any of that either.

 

[Sabine]

Leave the interests rates low, and let's have the "gas tax holiday." If gas prices shut down summer travel, it will hurt large and small businesses across the country.

 

[blackadder]

Leave the interests rates low, and let's have the "gas tax holiday." If gas prices shut down summer travel, it will hurt large and small businesses across the country.

Obama's basically right.

The gas tax "holiday" is a pander. Federal gas taxes are only about 5% of the price of gas based on the $4.00 per gallon price expected this summer.

That doesn't do a whole lot except increase the revenue shortfall that will be made up by more borrowing.

It doesn't do squat to address the root of the problem, which is oil dependency.

 

[cruize]

If we break our addiction to oil, it won't matter.

 

[JimEverett]

Its a statement of opinion, not a statement of fact.
A fed rate of 5 or 6% probably would not have much impact at all on dollar exchange rates. And anything over that probably wouldn;t have much more than a marginal impact (until you get into rates high enough to cause serious adverse effects).

IMO two facts are pushing dollar devaluation on the currency markets - dollar outflows, both consumer purchase of foreign goods and also multinational corporate investment of dollars overseas; and not nearly enough investment in dollar denominated assets. The latter might be affected in some way by a low fed rate, but only for those looking for some real short term store-of-value investing.

 

[DaveXA]

Well, the theory is correct that increased interest rates would lead to lower oil prices because the increased interest rates would strengthen the dollar. That said, I do agree tha having. A tax holiday on oil is nothing more than a ploy to get votes. It's not going to make that much of a difference. What really nneeds to happen is two fold. Increase refinery capacity and increase the availability of alternative feuls. I don't think it's an either/or proposition. We can couple wise utilization of the oil resources we have and expand research and development in alternative feuls/energy. The big problem is the oil lobby will have a lot to say about how quickly this happens. Greed is a big motivatior and will continue to rule the day until the voterrs say enough and pput people in power who are not beholden to the oil lobby.

 

[blackadder]

Well, the theory is correct that increased interest rates would lead to lower oil prices because the increased interest rates would strengthen the dollar. That said, I do agree tha having. A tax holiday on oil is nothing more than a ploy to get votes. It's not going to make that much of a difference. What really nneeds to happen is two fold. Increase refinery capacity and increase the availability of alternative feuls. I don't think it's an either/or proposition. We can couple wise utilization of the oil resources we have and expand research and development in alternative feuls/energy. The big problem is the oil lobby will have a lot to say about how quickly this happens. Greed is a big motivatior and will continue to rule the day until the voterrs say enough and pput people in power who are not beholden to the oil lobby.

At this point you could question how much stronger the dollar could get.

It would have some short term impact.

But the dollar was in a free fall even when interest rates were 2-3% higher than they are now due to the fundamental dollar glut in the world that is a result of our fiscal and trade policies.

I see no scenario in the next year or two (minimum) that is going to allow the Fed to increase interest rates by 300 basis points. We still have many months of housing weakness to work through.

Pushing rates up would derail any recovery in the housing markets.

 

[taygolf]

I say we ADD to the gas tax instead of take it away. Yes gas is high enough but I think we should make it percentage based instead of a flat rate so as gas prices go up so do the tax dollars that we get so we can invest them in other fuels. I also think the percentage should be increased so we can get more revenue to invest in other form of fuel.

While this is going on we should do a few more things. We should allow for new refineries to be built. We should put a minimum production tax on the existing refineries. So if they are only at 80% production then we tax or fine their butt daily until they get back above 90% or what ever we set the limit too. This will help a lot!

I also think we should allow for more nuclear power plants to be built.

All the increases in the tax revenue from the fines and the increased gas tax precentage should go to finding the best alternative fuel.

I am all for alternative fuels but we need to do a study on them before investing and this will take time.

For instance corn ethanol is not the answer for several reasons.
1) it increase the price of freaking corn which everything known to man eats which increases grocery cost.
2) you only get 75% of the gas mileage as gas and 75% of the performance as gas which really hurts its value. plus the 25% decrease in fuel mileage and the government incentives that we pay in tax dollars will negate any savings at the pump.

It is just not the way to go.

I think we need to take a long hard look at biofuels made from other products that we do not depend on so much(algea is one they are looking into now) or look into hydrogen but this is better left up to the scientist that do the study to decide what to invest in as a government. Maybe have a competition to see who can come up with the best idea but we also need environmental impact studies and economic impact studies on these as well.

It will take time but if we start now we can turn this thing around over the next 5 to 10 years and that is what it is going to take to fix it. There is no quick fix to a problem like this. It took years to get us here and it will take years to get us out.

T

 

[Sabine]

Obama's basically right.

The gas tax "holiday" is a pander. Federal gas taxes are only about 5% of the price of gas based on the $4.00 per gallon price expected this summer.

That doesn't do a whole lot except increase the revenue shortfall that will be made up by more borrowing.

It doesn't do squat to address the root of the problem, which is oil dependency.

Here's some 2003 figures: <table border="0" cellspacing="0" width="99%"> <tbody><tr><td colspan="2">
</td> </tr> <tr> <td width="222">Travel Expenditures *</td> <td align="right" width="230">[FONT=Arial, Helvetica, sans-serif]$554.5 Billion[/FONT]</td> </tr> <tr> <td width="222">Travel-Generated Payroll</td> <td align="right" width="230">[FONT=Arial, Helvetica, sans-serif]$158.4 Billion [/FONT]</td> </tr> <tr> <td width="222">Travel-Generated Employment</td> <td align="right" width="230">[FONT=Arial, Helvetica, sans-serif]7.2 Million Jobs [/FONT]</td> </tr> <tr> <td width="222">Travel-Generated Tax Revenue</td> <td align="right" width="230">[FONT=Arial, Helvetica, sans-serif] $94.7 Billion [/FONT]</td> </tr> <tr> <td width="222">Trade Surplus</td> <td align="right" width="230">[FONT=Arial, Helvetica, sans-serif]$2.6 Billion[/FONT]</td></tr></tbody> </table>
McCain's gas tax holiday would likely cost the feds 9 billion in lost federal gas taxes. In the big picture, that's chicken feed.

I don't care if a candidate gets votes out of this or not. I think it's the right thing to do. Didn't Bill Clinton suggest a gas tax holiday when gas prices soared after Katrina and get laughed at by Repubs? Anyway, I think we have to be careful about writing the gas tax holiday off as just a 3 month fix (Memorial Day to Labor Day), because summertime is the busy season for many businesses. It's what allows them to make it through the slow, lean months. States, like Texas that collect 20 cents per gallon, may follow with their own tax holiday, because the economic loss from heavily tempered tourism out weighs the gas tax loss to the state. Some travelers may be deterred by gas prices around $3.45, but may not be at $3.00 or so.

Of course we have to have longterm solutions. We are already buying more gas efficient vehicles, and we are making headway with other energy alternatives. However, we are also fighting off an economic meltdown. The gas tax holiday buys us some time with tourism-dependent industries/companies/jobs and other tax revenue, and tourism is linked to the price of gas.

 

[Jeff Miller]

once again, the fact that OPEC is holding back production to keep rates high, is completely ignored.

 

[blackadder]

In the big picture, that's chicken feed.

I've been hearing that for years and look where we are: reliant on the Chinese to fund our government.

 

[Pure Energy]

Although a little inflation is generally good, runaway inflation is bad for most of us.

However, a weak dollar is good and bad. It's bad when purchasing imports or travelling abroad but it's good for exporters and those who make their living in the travel industry. The weak dollar is amplified because of our dependence on imports (China) and products manufactured from oil (gasoline, plastics, etc.).

Tightening the money supply by increasing rates is probably not a good idea at this point in the game. That decision was wrestled with before the Fed started this binge of rate cutting and a determination was made that pumping liquidity into the markets was more important than the threat of higher inflation. I wasn't a big fan of the rate cuts at the time because I worry about inflation. However, they need to ride out this policy decision and give it some time to work. Changing their approach before we've had time to determine if it's working is not prudent in my opinion.

Keep in mind that Oil/Gas is a big part of our economy, but it's not the only aspect.

 

[dapperdan]

It sure looks like the dollar made a bottom the weekend of the Bear Sterns/JPM managed merger. Maybe not THE bottom, too early to tell. But at least a short term bottom.