price of oil

[Mr Rayon]

Why does the price of oil differ between different countries?

 

What is it that determines the price of oil?

 

Is it more than supply and demand? Is there more to it that that?

 

Who has power over the price of oil?

[keelanz]

Why does the price of oil differ between different countries?

 

What is it that determines the price of oil?

 

Is it more than supply and demand? Is there more to it that that?

 

Who has power over the price of oil?

 

Tax, supply and demand as well as the amount of stock that country may hold

 

for example here in england we pay much more for oil because 1) we get taxed alot more more 2) our country doesnt own much oil relatively to america or canada and 3) were a small country with a fairly high population, so we have a high demand to keep the economy moving.

[zapatos]

Why does the price of oil differ between different countries?

 

What is it that determines the price of oil?

 

Is it more than supply and demand? Is there more to it that that?

 

Who has power over the price of oil?

Different types of oil sell for different prices, but the base price of comparable oil is pretty much the same for all countries on the open market. Of course if you own the oil you can easily sell it for less to certain customers, as many state run oil industries do within their own country to keep the price of oil products down for their citizens.

 

The price of oil is determined by its value to others, supply, demand, fear, OPEC, stockpiles, the economy, refining capabilities, war, technology, etc.

[lemur]

2) our country doesnt own much oil relatively to america or canada

As I recall, during the deep water horizon disaster I heard that BP had to be imported even though it was pumped from the Gulf of Mexico. The point is that national oil-ownership has little to do with the political boundaries associated with nation-states. It has more to do with networking power, control, and economic position.

 

My impression of what determines oil-prices comes down to speculation, the same as any other market. If lots of people are buying a commodity, the price goes up because people assume that the price will go up due to the scarcity caused by lots of people buying it. When lots of people sell a commodity, the price goes down because people assume no one wants to buy it and they want to pay less for something that they will have to compete to sell by lowering the price.

 

But what causes the expectation that prices will rise or fall, thus stimulating people to buy or sell, respectively? Here I think there are numerous possibilities but part of it is simply the identification and recognition of cultural patterns. E.g. whenever political instability intensifies in the middle-east, oil prices seem to go up. So any hint of political instability emerging in that region will trigger speculators to buy oil in the hope of making money. This, in turn, will cause the price to go up.

 

What would cause oil prices to drop significantly? Well, as long as demand is relatively inelastic, the price won't go down more than it has to, because investors know that they can make more money by keeping the price per gallon as high as possible. The only way, I think, that they might lower the price significantly is if they expected to sell a great deal more at a lower price, i.e. enough to make more profit at that price level than the higher one. But the problem with that is how much more can people do with gas than is already being done?

 

The only other possibility, I think, is that people and businesses consume increasingly smaller amounts of gas to the point where there is supply-side competition where sellers are struggling just to get people to buy what little oil they can pump out of the ground. At that point, consumers would have a strong bargaining position to only agree to contract oil suppliers that promise the lowest possible price. This would create bidding wars between suppliers just to gain access to markets in the first place. But what cultural changes would be needed to put consumers in such an advantageous bargaining position aside from running their economies totally gas-free? As long as there is some level of high-inelasticity of demand for gas, I think gas prices will remain high to milk the most revenue possible out of consumption that cannot be avoided at any cost.

Edited May 6, 2011 by lemur

[Moontanman]

It has been reported widely in the news lately that the current jump in gas prices (in the USA anyway) is due to speculation not lack of oil.

[jackson33]

Why does the price of oil differ between different countries?[/Quote]

 

Voltman; It doesn't; Brent Sea Crude, that is traded in Europe or Texas Sweet, traded in the US, can vary, but normally near the same. What is paid for a barrel, does vary according to how a particular Nations currency relates to the US Dollar on any one day.

 

What is it that determines the price of oil?[/Quote]

 

Briefly, although very complicated, world market futures trading, determines the value of any commodity from the current month, to years into the future. An airline company can contract with a refinery to supply fuel years in advance, for a certain price, in the same way most produce is bought from the larger Corporate and small farmers, before the crop is even planted.

 

Is it more than supply and demand? Is there more to it that that?[/Quote]

 

Add "anticipated" to "supply and demand" and that's pretty much what dictates prices. Again however, monetary inflation or deflation to the US$, can make a big difference.

 

Who has power over the price of oil? [/Quote]

 

The consumer: However this can be Government's themselves opposed to actual consumption of the consumer. China for instance, has been buying up future production all around the world and many countries have stored reserves of crude oil, including the US, which they can add to or place into the market.

 

If your trying to equate gasoline/petrol prices, to the barrel of oil, that final cost is based on many things including taxes (City/State/National), transportation cost, cost of refining to specific requirements and profits.

[lemur]

It has been reported widely in the news lately that the current jump in gas prices (in the USA anyway) is due to speculation not lack of oil.

That's a misleading statement since "lack of oil" is not known except to the extent that various analysts form estimates and publish these for the benefit of investors. Speculation can just as easily create scarcity as respond to it by driving up prices on the belief that producers will avoid starting a price-war with each other. I find this a form of collusion (i.e. oligopolistic behavior) but since it doesn't require direct communication between suppliers to occur, and there's nothing preventing suppliers from competing, it isn't viewed as a failure of free-market competition (I think). I also don't believe this type of supply-side behavior is limited to oil markets. I think there is generally an economic culture of avoiding price-competition unless absolutely necessary. Sellers view price-competition as a mutually detrimental practice that should be avoided where possible by seeking less competitive 'niches.' The supply-side only likes the free market insofar as it allows them to escape regulation, just as demand-side only likes the free market when it benefits them. Everyone likes to have rights but most shirk the responsibilities that come with them whenever possible.

Edited May 6, 2011 by lemur

[imatfaal]

Lemur - sorry, but both Moontanman and Jackson have it right that speculation on the futures markets are the nub of the matter. The connection with availability at the well-head or demand at the refinery is passing and illusory in the short term - and these movements are all short term. Log on to the Intercontinental Exchange (theice.com) here in London or the New York Merc (Nymex) to see the unimaginable volumes of commodities being traded with only a passing nod to the underlying physical market. I am a oil-tanker charterer and have a pretty good handle on the amount of oil on the water and in the pipelines at any one time - it is several orders of magnitude smaller than the oil traded at ICE or the Merc in any one day. In the long term supply and demand will reassert themselves and they set a baseline for the market to follow - but the changes in the oil price that affect all our wallets and make the headlines at the moment are fluctuations due to trading not macroeconomic trends.

[lemur]

Lemur - sorry, but both Moontanman and Jackson have it right that speculation on the futures markets are the nub of the matter. The connection with availability at the well-head or demand at the refinery is passing and illusory in the short term - and these movements are all short term. Log on to the Intercontinental Exchange (theice.com) here in London or the New York Merc (Nymex) to see the unimaginable volumes of commodities being traded with only a passing nod to the underlying physical market. I am a oil-tanker charterer and have a pretty good handle on the amount of oil on the water and in the pipelines at any one time - it is several orders of magnitude smaller than the oil traded at ICE or the Merc in any one day. In the long term supply and demand will reassert themselves and they set a baseline for the market to follow - but the changes in the oil price that affect all our wallets and make the headlines at the moment are fluctuations due to trading not macroeconomic trends.

How is the issue of actual reserve availability related to the issue of macro-economic trends vs. short-term speculation? The point is that prices are always due to speculation and speculation may take into account any information in any way. Prices could just as easily plummet if investors speculated that widespread price-wars between oil suppliers would occur, regardless of how possible or likely that may be. The point is that investment is a response to information, regardless of whether that information may be valid or not. It is misleading to say that prices could be the direct result of lack of oil, because there's no way for lack of oil to directly influence prices except by suppliers (including investors) to speculate that buyers will be willing to pay more for a scarce commodity. What do you expect? That barrels will be auctioned off one by one to the highest bidder as they trickle out of the wells?

[jackson33]

lemur: Availability of crude into the future does play a roll in current crude prices, but this has nothing to do "Peak Oil", "AGW" or any political argument. There are plenty of reserves around the world for energy resources and the US leads them all with it's resources, especially in natural gas and coal.

 

The world produces approximately 70/71 mb/d (million barrels per day) and consumes 69/70 mb/d, on average. Any disruption in that production or the pipe line to the refineries, can and often does spike the prices paid. Aside from the problems in North Africa and the Middle East, the US has been virtually shut down for new production and all this is figured into the current prices.

 

 

Adding a little to my previous post, Gasoline from the refinery at this minute, on average is US$3.10/g and diesel (traded as Heating oil) is 2.85. Whatever your paying for Gasoline or Petrol, figured into gallons, over these prices, have nothing to do with cost. In the US, the average gallon Nationally is about 4.00/G, but in many European Countries, that final cost (converted to G and US$) is nearing $10.00 per gallon.

 

http://money.cnn.com/data/commodities/

[Athena]

Lemur - sorry, but both Moontanman and Jackson have it right that speculation on the futures markets are the nub of the matter. The connection with availability at the well-head or demand at the refinery is passing and illusory in the short term - and these movements are all short term. Log on to the Intercontinental Exchange (theice.com) here in London or the New York Merc (Nymex) to see the unimaginable volumes of commodities being traded with only a passing nod to the underlying physical market. I am a oil-tanker charterer and have a pretty good handle on the amount of oil on the water and in the pipelines at any one time - it is several orders of magnitude smaller than the oil traded at ICE or the Merc in any one day. In the long term supply and demand will reassert themselves and they set a baseline for the market to follow - but the changes in the oil price that affect all our wallets and make the headlines at the moment are fluctuations due to trading not macroeconomic trends.

 

The 1970 recession in the US was caused by OPEC's embargo of oil to the US.

 

I think you need to add to this fluctuations in politics. For example, OPEC embargoed oil to the US, because it didn't like the US position on the Israel and Palestine conflict. The embargo caused a recession in the US in the 1970 's. Carter told us we must conserve and he put us on a strong program for developing alternative energy. Reagan told us we didn't need to conserve and dismantled the move to alternative energy. He slashed domestic budgets to pour money into military spending, and ever since the US has been using its military might, and CIA, to "defend its economic interest". The real price of oil is our national debt, and this justifies why US citizens pay less for gasoline. They pay for the military force, that has been making sure its trading partners have plenty of oil.

 

Of course when OPEC embargoed oil, this increased the demand for oil from wells not controlled by OPEC and this increases the development of oil in the US. Then the mid east realizes it is loosing its markets so they increase production, and this increases the supply and dumps the price, and this forces the small oil operations to shut down, decreasing the supply and the price goes back up.

 

Saudi Arabian citizens are demanding a lot, and Saudi Arabia must sell oil to keep its citizens happy, and the same time it is pressured to not flood the market with oil and dump the price of oil. If they could not keep the citizens content with oil profits, the citizens would rebel like they did in Egypt. So the Saudi Arabian demand for schools, hospitals, roads etc. also plays into the price of oil.

 

Does anyone think about what will happen when the oil rich countries today, start running out of oil? Their populations are increasing and the people are demanding more. How will their governments meet these demands when the oil is gone? The real price of oil is a very bad future, if we do not become very creativity in resolving future problems before it is too late.

Edited May 6, 2011 by Athena

[lemur]

lemur: Availability of crude into the future does play a roll in current crude prices, but this has nothing to do "Peak Oil", "AGW" or any political argument. There are plenty of reserves around the world for energy resources and the US leads them all with it's resources, especially in natural gas and coal.

 

The world produces approximately 70/71 mb/d (million barrels per day) and consumes 69/70 mb/d, on average. Any disruption in that production or the pipe line to the refineries, can and often does spike the prices paid. Aside from the problems in North Africa and the Middle East, the US has been virtually shut down for new production and all this is figured into the current prices.

 

 

Adding a little to my previous post, Gasoline from the refinery at this minute, on average is US$3.10/g and diesel (traded as Heating oil) is 2.85. Whatever your paying for Gasoline or Petrol, figured into gallons, over these prices, have nothing to do with cost. In the US, the average gallon Nationally is about 4.00/G, but in many European Countries, that final cost (converted to G and US$) is nearing $10.00 per gallon.

 

http://money.cnn.com/data/commodities/

Imo, there are two types of information on oil availability/scarcity: 1) those that cause the price to go up 2) those that cause the price to go down. There are also two approaches to long-term consumption strategies: 1) those that result in an end of the non-renewable reserves 2)those that result in progressive reductions in demand that eventually decrease consumption to sustainable levels. When I drive a car, I look as far ahead in the road as I can see and if there is a cliff, I begin slowing down immediately so I won't risk having to slam on the brakes at the last moment. I do not accelerate. I don't tell myself that I'll have plenty of time (and ability) to brake when the time comes. I start slowing down immediately and making a plan for where to go elsewhere than off the cliff.

 

 

 

[jackson33]

When I drive a car, I look as far ahead in the road as I can see and if there is a cliff, I begin slowing down immediately so I won't risk having to slam on the brakes at the last moment. I do not accelerate. I don't tell myself that I'll have plenty of time (and ability) to brake when the time comes. I start slowing down immediately and making a plan for where to go elsewhere than off the cliff.[/Quote]

 

lemur; Of course your passing on the favorite slogan used by today's environmentalist and the common rebuttal is "What if your hallucinating?". I've been hearing this same scenario for years, based on individual grievances of select segments of society, wanting to achieve some personal agenda.

 

Fortunately, Capitalism or the ingenuity of other individuals have always looked for and found ways to bridge that cliff with the next land mass, creating the best possible quality of life for the most possible. I can't imagine what life means for those that so fear the end of everything that has been achieved and wish only to bring down those that have got us to this point...

 

 

Does anyone think about what will happen when the oil rich countries today, start running out of oil? Their populations are increasing and the people are demanding more. How will their governments meet these demands when the oil is gone? The real price of oil is a very bad future, if we do not become very creativity in resolving future problems before it is too late. [/Quote]

 

Athena; Oh my, what are you being taught? Generally speaking, Governments can only exist on what they take from the people, in the case of the US and most the industrialized world, it's in the form of taxes or bribes (permits) to extract the Nations (not governments) natural resources.

 

As for Monarchy's, such as Saudi Arabia, many and in particular Dubai (United Arab Emirates), they have long been planning for an eventual end of international oil demands. Forms of Capitalism have worked there way into these countries and even others like China, diversifying their economies.

 

The real price of oil is our national debt, and this justifies why US citizens pay less for gasoline. They pay for the military force, that has been making sure its trading partners have plenty of oil. [/Quote]

 

Our National Debt, is a serious problem and some has been a result of IMPORTS and yes I'd agree we as a Nation are justifiably involved in maintaining a free flow of oil to our allies. However to solve the ND problem, you might look at domestic issues that have had a whole lot more to do with it's increase, than defending our allies, IMO.

[Athena]

lemur; Of course your passing on the favorite slogan used by today's environmentalist and the common rebuttal is "What if your hallucinating?". I've been hearing this same scenario for years, based on individual grievances of select segments of society, wanting to achieve some personal agenda.

 

Fortunately, Capitalism or the ingenuity of other individuals have always looked for and found ways to bridge that cliff with the next land mass, creating the best possible quality of life for the most possible. I can't imagine what life means for those that so fear the end of everything that has been achieved and wish only to bring down those that have got us to this point...

 

 

 

 

Athena; Oh my, what are you being taught? Generally speaking, Governments can only exist on what they take from the people, in the case of the US and most the industrialized world, it's in the form of taxes or bribes (permits) to extract the Nations (not governments) natural resources.

 

As for Monarchy's, such as Saudi Arabia, many and in particular Dubai (United Arab Emirates), they have long been planning for an eventual end of international oil demands. Forms of Capitalism have worked there way into these countries and even others like China, diversifying their economies.

 

 

 

Our National Debt, is a serious problem and some has been a result of IMPORTS and yes I'd agree we as a Nation are justifiably involved in maintaining a free flow of oil to our allies. However to solve the ND problem, you might look at domestic issues that have had a whole lot more to do with it's increase, than defending our allies, IMO.

 

 

There was a time in the US when most of its revenue came from exporting oil. A national debt is not just about how much a nation spends, but also how great is its revenue. There is a slight revenue difference between being the world's supply of oil and having to import it.

 

I will ask again, any idea what will happen when the mid east runs out of oil?

 

The greatest expense the US has is military expenses, and considering its economy would collapse without oil, it is unlikely to cut its military spending by much. I know this is way off topic, but I think much of the world lost interest in colonizing the north America when they did not find gold. Today, oil is to world economies what gold was then. We have to control it for economic reasons, and our military expenses are part of the true cost of oil.

 

How do you diversify an economy without the resources to build an economy? Seriously give the need for resources some thought, and tell me what are the resources the mid east is going to use for its economy when the oil is gone? Consider, oil was the greatest source of revenue the US had and that it was a very rich nation, that could avoid debt, and now it must import oil and can not avoid debt. What is the difference that makes to the economy?

Edited May 7, 2011 by Athena

[jackson33]

There was a time in the US when most of its revenue came from exporting oil. A national debt is not just about how much a nation spends, but also how great is its revenue. There is a slight revenue difference between being the world's supply of oil and having to import it. [/Quote]

 

Athena; Respectfully, since I'm aware you trying to learn, no Federal Income has ever come from the sale of any natural resource, unless it was based on some tariff to export, which historically was the original source for US income. You are correct however, in that US Business concerns were an NET exporter of oil until the 1960's. The reasons this changed, arguably were not the lack of product, rather the comparative cost to produce the barrel of oil, permits to labor.

 

I will ask again, any idea what will happen when the mid east runs out of oil? [/Quote]

 

Realistically, the middle east would run out of oil or certainly won't be able to supply the needs it currently does for very much longer, if it was the only source for crude oil. However Brazil, Mexico, Russia and several African Counties have been increasing their export capabilities from natural sources and technology has offered untold billions of barrels by extracting crude from rock formations deep in the earth. Additionally Iraq may have reserves unknown until recently, thought to rival everything SA has or will ever have and BP and others were in Libya, developing additional fields, until the violence started. Top all this off with the development of all kinds of alternatives, not excluding making fuel energy from other than the natural way, called ethanol or using Natural Gas, where diesel (fuel oil) is now being used and your then looking hundreds of years into the future, where there is no telling what energy technology can and will develop.

 

The greatest expense the US has is military expenses, and considering its economy would collapse without oil, it is unlikely to cut its military spending by much. I know this is way off topic, but I think much of the world lost interest in colonizing the north America when they did not find gold. Today, oil is to world economies what gold was then. We have to control it for economic reasons, and our military expenses are part of the true cost of oil. [/Quote]

 

Even today, many of the World's people and or business, would move to America in a flash, if they could, although this would include Canada, no interest has been lost.

 

I do agree, the US Federal Government could cut back some on it's military expenses and frankly the good will it's actually responsible for, has been replaced by the numbers of Americans that travel the world, or as have American Business thrived in foreign Nations.

 

How do you diversify an economy without the resources to build an economy? Seriously give the need for resources some thought, and tell me what are the resources the mid east is going to use for its economy when the oil is gone? Consider, oil was the greatest source of revenue the US had and that it was a very rich nation, that could avoid debt, and now it must import oil and can not avoid debt. What is the difference that makes to the economy? [/Quote]

 

Athena, Japan, Singapore, Taiwan, among others had/have little or NO natural resources and have done fine, while importing all of them. That's the nature of "Free Market Capitalism" and the reason it's been successful. What's called a "Service Economy" which basically is the entire UK economic base, could work well for any Nation.

[lemur]

lemur; Of course your passing on the favorite slogan used by today's environmentalist and the common rebuttal is "What if your hallucinating?". I've been hearing this same scenario for years, based on individual grievances of select segments of society, wanting to achieve some personal agenda.

Maybe, but do you see how weak it is to resort to ad hominem generalizations instead of explaining why the argument is flawed on the basis of logical reasoning?

 

Fortunately, Capitalism or the ingenuity of other individuals have always looked for and found ways to bridge that cliff with the next land mass, creating the best possible quality of life for the most possible. I can't imagine what life means for those that so fear the end of everything that has been achieved and wish only to bring down those that have got us to this point…

I think you could just as easily say that fossil fuel has been abused to usurp the decentralized vibrance that was free market capitalism. Fossil fuels were used to drive railroads, ships, and other means of transforming local productivity into mere raw-production facilities for distant sovereigns. Pre-industrial capitalism allowed greater independence of supply and demand since productivity and the supply-chains that facilitated it didn't require such elaborate control and organization. As industrialism evolved, systematic control, organization, and centralization grew to the point of replacing free market capitalism with corporatism and statist (semi) centralism that sacrificed a great deal of freedom and independence in the service of supporting large industrialists and their markets (labor and consumer).

 

Presumably as energy-usage subsides to sustainable levels, so will the counter-productive amounts of busy-work that serve primarily as justification for distributing the means of consumption for mass-produced goods.

Edited May 8, 2011 by lemur

[Athena]

Athena; Respectfully, since I'm aware you trying to learn, no Federal Income has ever come from the sale of any natural resource, unless it was based on some tariff to export, which historically was the original source for US income. You are correct however, in that US Business concerns were an NET exporter of oil until the 1960's. The reasons this changed, arguably were not the lack of product, rather the comparative cost to produce the barrel of oil, permits to labor.

 

 

 

Realistically, the middle east would run out of oil or certainly won't be able to supply the needs it currently does for very much longer, if it was the only source for crude oil. However Brazil, Mexico, Russia and several African Counties have been increasing their export capabilities from natural sources and technology has offered untold billions of barrels by extracting crude from rock formations deep in the earth. Additionally Iraq may have reserves unknown until recently, thought to rival everything SA has or will ever have and BP and others were in Libya, developing additional fields, until the violence started. Top all this off with the development of all kinds of alternatives, not excluding making fuel energy from other than the natural way, called ethanol or using Natural Gas, where diesel (fuel oil) is now being used and your then looking hundreds of years into the future, where there is no telling what energy technology can and will develop.

 

 

 

Even today, many of the World's people and or business, would move to America in a flash, if they could, although this would include Canada, no interest has been lost.

 

I do agree, the US Federal Government could cut back some on it's military expenses and frankly the good will it's actually responsible for, has been replaced by the numbers of Americans that travel the world, or as have American Business thrived in foreign Nations.

 

 

 

Athena, Japan, Singapore, Taiwan, among others had/have little or NO natural resources and have done fine, while importing all of them. That's the nature of "Free Market Capitalism" and the reason it's been successful. What's called a "Service Economy" which basically is the entire UK economic base, could work well for any Nation.

 

I hate it when people are in complete denial of reality. Oh well.

[CaptainPanic]

Athena; Respectfully, since I'm aware you trying to learn, no Federal Income has ever come from the sale of any natural resource, unless it was based on some tariff to export, which historically was the original source for US income.

States sell licences to companies for exploiting natural resources. They're called royalties. This wikipedia text describes it in a little more detail:

 

From the 1950s to at least 2002, drilling for oil and gas on federal lands and waters produced the second largest source of revenue for the federal government other than taxes.[17] The Minerals Revenue Management (MRM) division of MSM was responsible for managing all royalties associated with both onshore and offshore oil and gas production from federal mineral leases.

 

And although I haven't looked it up for other resources, you can bet that the state get some money for the exploration of any natural resource - probably even for ordinary water, and maybe even for the use of land in general (for farming or anything else).

 

So, yes, a LOT of federal income comes from the (indirect) sale of natural resources. The wikipedia site continues to explain that the old system (until 2002) was abused by industry, who consistently paid too little. It does not however seem to explain the current regulations. Also, it is incredibly difficult to find the exact income from this.

 

For example, the Netherlands (the state treasury) has received over 211 billion euro for its gas. Unfortunately, the wikipedia site hasn't been translated into English, so I have to link to a Dutch one.

Edited May 9, 2011 by CaptainPanic

[Athena]

Thanks Captain Panic. Oil revenue has covered Texas needs for many years, and given Texas a huge economic advantage. In Alaska, not only have roads, schools, services been paid by oil revenues, but citizens have gotten checks, instead of tax bills.

 

jackson33, respectfully, trying to learn is a good thing, and you have something to learn.

 

Right now there is a debate about increasing taxes on oil companies to help pay down the deficit. The oil industry is arguing it is best for the national revenue to not raise taxes on oil companies. Hum, how does that work? Other oil countries have nationalized oil and use the revenue to give their citizens roads, clean water, schools, etc.. We defend our economic interest around the world with tax payer paid military force. Capitalist did what they could to stop the nationalization of oil, and it is a good thing for the citizens of those countries that they did get control of their oil. I am not sure that our capitalist treatment of oil is best for our nation either, but this is a very complex subject! Cheap oil is good for economic growth, and all countries what their citizens to have cheap oil products. Taxing oil would be a cost passed on to consumers. I don't understanding how things work when the oil is nationalized.

 

What happens to our economy when our exports are greater than our imports? Oil was our greatest export. Now we are importing oil, and our imports are greater than our exports. What might that do to national wealth? Would it make a difference in national revenue?

 

Oil money from the oil countries around the world, was poured into our banks, and this meant our banks had a lot of money for loans. Much of this money was used for high interest foreign loans. Now the mid east has its own banking system, and we had a problem with housing loans? I am not sure, but I think there is a connection between the banks no longer being flush with foreign oil money, and real bad banking decisions? Our interest rates are too low to attract oil money from around the world, so our banking system has been loosing money. I think this turned our healthy banking system into a patsy scheme. The first hit was third world countries didn't repay their loans, and the oil money didn't keep rolling in. Then we have a housing fiasco. Now I think we are headed towards a student loan fiasco. But don't worry. Tax payers can always cover the screw ups of the banking system. They have too, because no one wins when a patsy scheme falls. But what really bothers me is the number of people who think there are no limits, and that what we are doing works, and the things will just keep getting better.

 

Oil is traded in dollars, and that means many small countries peg their money to the dollar. All the countries did what they could to have dollars, so they didn't have to pay an exchange rate when buying oil. That really helped the value of the dollar. If the dollar looses value, it effects our economy in a big way, because of how it is intertwined with other economies.