Offshore Drilling: Fact Vs. Fiction

[Pexster]

There are other reasons for the weak USD. The one that bothers me most is our irresponsible fiscal policies under the Bush administration. And you "conservatives" (insert laugh here) have supported them for almost eight years.

[MTAtech]

Quote:

Originally Posted by Epidemic

I also add to that one more question, how does one raise the value of the dollar?

I can answer that, the Fed can raise interest rates. Of course, there are ramifications for doing that too. Recently, exports have been up directly due to the lower dollar. In addition, higher interest rates slows down the economy which is already slow.

[Epidemic]

Quote:

Originally Posted by MTAtech

I can answer that, the Fed can raise interest rates. Of course, there are ramifications for doing that too. Recently, exports have been up directly due to the lower dollar. In addition, higher interest rates slows down the economy which is already slow.

well first one I can think of is recession/depression from that method.

decreased oil trade deficit sounds better to me.

[The Real Bingo]

Quote:

Originally Posted by MTAtech

TRB, aren't oil prices rising world-wide, even in Europe where they use the Euro?

Since when is oil traded in Euros?

Quote:

Originally Posted by Epidemic

I also add to that one more question, how does one raise the value of the dollar?

[MTAtech]

Quote:

Since when is oil traded in Euros?

That's irrelevant. If oil used to cost X Euros and now it costs 1.5X Euros, the price has gone up for Europeans who don't use the dollar as a currency.

As an example, suppose that X dollars used to equal Y Euros, which either bought one barrel of oil. Now the dollar is down against the Euro and only buys 0.75X barrels of oil. Yet, Y Euros should still buy a barrel of oil, even though it's more in dollars. Since it doesn't, that facts undercuts the theory that oil has gone up only because the dollar has fallen.

[The Real Bingo]

Quote:

Originally Posted by MTAtech

That's irrelevant. If oil used to cost X Euros and now it costs 1.5X Euros, the price has gone up for Europeans who don't use the dollar as a currency.

As an example, suppose that X dollars used to equal Y Euros, which either bought one barrel of oil. Now the dollar is down against the Euro and only buys 0.75X barrels of oil.

Obviously oil is going up. You really don't think it would be $20/barrel if our dollar was stronger than the Euro, do you?

The point is, the weak dollar is making it go up quicker than it normally would. Every day the dollar loses ground, oil goes up by that much just to break even with the loss. Couple that with rising demand and you have the sharp increases we see today.

Quote:

Yet, Y Euros should still buy a barrel of oil, even though it's more in dollars.

[Epidemic]

Quote:

Originally Posted by The Real Bingo

The point is, the weak dollar is making it go up quicker than it normally would. Every day the dollar loses ground, oil goes up by that much just to break even with the loss. Couple that with rising demand and you have the sharp increases we see today.

the weak dollar makes it slightly worse. but in the end your analysis of remaining 20 dollars a barrel is a little off base. We are not talking about a production cost increase, bringing the oil out of the ground has not doubled in the past 2 years. Profit margin is all that has changed perceivably, mineral rights holders (countries) have simply seen the profit margin increase by several hundred %.

example
oil used to take 90 dollars to get it out of the ground with 10 profit.

Now 2 years later oil costs 100 dollars to get out of the ground and 40 dollar profit.

in my example profit went from 10% to 40% a 300% increase in profit margin for oil drilling nations.