Addendum...second paragraph, third sentence..."I find it difficult to not
believe that, if the world beyond the US finds a way to buy oil in Euros, this
will only add to the rug that is being pulled out from under the US economy."
I'm also very curious what anyone thinks about my final suggestion that a
recent decision to increase the US Strategic Petroleum Reserve to 1 billion
barrels could provide a potential for bailing out the US if the world does
begin denominating oil in Euros, given that the present US current account
balance is near a negative $650 billion and the price of oil presently is
around $60 per barrel. The Euro presently stands at 1.33 versus the US$, in
other words, 1 Euro = $1.33. So oil priced in Euros would cost the US $79.80
per barrel, if I'm calculating correctly. And the US could easily balance its'
$650 billion account balance deficit and still have how many billion barrels of
oil in reserve? Of course, the price of energy would immediately spike for the
US citizenry and wreak major havoc for awhile, but we'd adjust. Note that for
now, generally, for every $1 per barrel of oil increase/decrease, the price at
the pump increases/decreases 10 cents per gallon. So presently, we would have
to add $2.00 to each gallon of gas...$4.20 per gallon in my neck of the woods.
Of course, that's going up, especially as China adds more cars to the world
driving public. See:
http://english.people.com.cn//200612/09/eng20061209_330504.html
Mike DuPree
----- Original Message -----
From: M&K DuPree
To: biofuel@sustainablelists.org
Sent: Saturday, December 09, 2006 5:42 PM
Subject: Re: [Biofuel] Oil Pricing
Tom...good info. I've been trying to learn how to trade foreign currency
since May of this year, as much because of what I believe is coming (soon) for
the US economy and if I could learn to do it successfully it would be a way for
me to help my family through what I perceive to be these coming difficulties in
the U.S. Not sure if this makes me a bum as far as the List is concerned, but
it's what I'm doing. Anyway, because of what I've been learning since May, I
certainly have to agree with what you have written for as far as it goes.
You offer a positive spin on a declining US$ and I thank you for that.
There is definitely that side to a declining US$. However, since I'm no
economist and I can't even begin to be able to completely think this through I
find it difficult to believe that if the world beyond the US finds a way to buy
oil in Euros, this will only add to the rug that is being pulled out from under
the US economy. Oil runs the world, whether we here on the List want to admit
that or not, it does. In fact, I wonder if a recent decision to increase the
US Strategic Petroleum Reserve isn't at least in part in response to what may
be the trend to trade oil in Euros. See this link:
http://english.people.com.cn//200612/09/eng20061209_330509.html A cursory
Google search of US oil consumption puts us at around 20 million barrels per
day as of November 2002. See:
http://www.thirdworldtraveler.com/Oil_watch/World_Oil%20_Table.html So let's
see, 1 Billion divided by 20 million...oops...50 days worth of fuel source???
Hey, that's plenty of time to develop alternative energy sources and the
vehicles and distribution systems that will use those sources!!!!!
Keep in mind too that the US$ began it's present leg to a longer term
decline in February of this year, with the whole month of April and recently
late October through til now being the steepest declines from February til now.
Do these dates have anything to do with the Iranian oil bourse...originally
scheduled to open in March? It wasn't. Then it was thought to be opened in
May, thus the further runup of the Euro against the US$ in April, but again, no
opening. Throughout the summer months EUR/USD channeled up and down. Then
just before Thanksgiving a huge spike up of the Euro against the US$, which was
a continuation of a trend around the end of October. Now recently an
announcement on CNBC of Iran having completed their planned oil bourse. I'm
presently trying to find this confirmation through internet searches, but so
far no luck. But all I can tell you is that Mark Haines (I spelled his name
with a "y" originally...sorry Mark) publicly stated in a kind of conversation
with his co-show host Erin Burnett that it is now confirmed that Iran is
trading its' oil in Euros.
This is huge news, but as I mentioned in my first post of this thread,
how much of the news that really matters gets broadcast? Nonetheless, the
information is there. Keep in mind the FX (foreign exchange) market is the
largest market on the planet, trading up to over $3 trillion at any given time.
It is also a market that must exist to allow countries to do business with
each other. Consequently, the major players are not the many amoebas like me,
but central banks and multinational corporations...as usual. Do you think
these folks know what's going on? Of course you do. These folks are the ones
who not only know what's going on, they are making what's going on. So I would
suggest, if trading oil in Euros has been established and Iran is able to
defend that establishment, then CYA US$ and along with it the US economy, at
least as we have known it.
Do a Google search on the Iranian oil bourse or related words and see
what you find. Mike DuPree
PS, yes I'm very familiar with dailyfx.com, but I don't use all the
resources there like I should. I do download their excellent calendar of each
week's economic news releases from various countries throughout the world,
mainly the US, A few of the major Eurozone countries like Germany, France, and
Italy as well as European Central Bank rate decisions and speeches by ECB
officials, Great Britain, Swiss, Japan, Australia, Canada and New Zealand.
I have my suspicions about all these numbers, like I have my suspicions
why the Forex (foreign exchange) market was ever opened to the amoebas of the
world. I suspect the numbers are cooked, eg recent US revisions in especially
important numbers like NonFarm payrolls being so far off from the initial
releases. I also suspect, because the Forex was not always opened to the
amoebas of the world, the powers that be somehow in their magisterial wisdom
decided they needed more liquidity, more pawns to play their game. Hopefully
this pawn can at least grab a few crumbs off the floor. Finally, check out the
Bank for International Settlements (http://www.bis.org/index.htm) "BIS
Quarterly Review, September 2006" (
http://www.bis.org/publ/qtrpdf/r_qt0609.htm, specifically
http://www.bis.org/publ/qtrpdf/r_qt0609e.pdf). In the "Conclusions," there is
this remark, "the liquidity and sophistication of euro financial markets are
fast approaching those of US dollar markets (Galati and Wooldridge (2006). This
helps to strengthen the position of the euro as a possible alternative to the
US dollar in official reserves." The BIS is an international organization,
providing banking services exclusively to central banks and other international
corporations. They are headquartered in Basel, Switzerland, with offices in
Hong Kong and Mexico City. If the euro is ever estanblished as the
denomination of choice in the trade of oil, a billion barrels of oil in reserve
won't be used to keep America on the road. The U.S. Current Account Balance is
just below a negative (as in deficit, as in debtor, as in screwed blue and
tatooed) $650 Billion. The price of oil presently is right around $60/barrel.
Hmm.
----- Original Message -----
From: Thomas Kelly
To: biofuel@sustainablelists.org
Sent: Friday, December 08, 2006 12:04 PM
Subject: Re: [Biofuel] Oil Pricing
Mike,
I have my own concerns regarding the US economy ..... debt, trade
deficit, housing market & how it is being financed, etc etc. What measures
madmen with power will use to "protect us".
I follow currencies as I follow species of organisms .... as
indicators of economic/environmental woes. Just as our environment has been
signaling us about problems (for some time now) I think we are getting some
real serious signals regarding our economy.
For info re: currency pairs .... what has happened, upcoming news
drivers, predictions, etc. there are websites such as www.dailyfx.com
The Non-Farm Payroll (NFP) numbers come out today. It is one of the major
factors that will effect the USD .... no mention of any Iranian switch to
Euros, or the impact it has had/is having on USD.
Just my thoughts:
If the "spike" in EUR/USD to 133 ("Thanksgiving weekend") was due to
expectations of a switch by Iran from USD to EUR for oil purchase, and a return
to 133 (12/6/06) occurred on the actual "news" of the switch, the switch
apparently had very little impact on the strength of the dollar. I would have
expected much more.
Let's take a short walk through the recent past:
Almost 2 years ago
End of Dec 2004 (12/29 -12/31):
EUR/USD = 1.36+ (highest that I know of...speculation we may hit 1.37 by
June)
GBP/USD = approaching 1.9200
USD/JPY = ~103
End of March 2005 (just 3 months later)
EUR/USD = 1.3200 (-2.9%)
GBP/USD = 1.8911 (-1.5%)
USD/JPY = 106.80 (+3.7%)
(USD is gaining strength against each of the 3 currencies)
End of June 2005 (another 3 months)
EUR/USD = ~1.2100 (-8.3%)
GBP/USD = 1.8095 (-4.3%)
USD/JPY = 110.66 (+3.8%)
(USD continues to gain strength)
In 6 months there were significant reversals in these three currency
pairs.
Why?
1. At 1.36+ European goods become far less attractive to US consumers.
(On a personal note: As I saw the price of imported beer go from $6/6 pack
to $7, to $8, to $9, and even $10/6 pack I re-discovered Miller Brewery
(Milwaukee, WI, USA) and Yuengling's Brewery (Pottsville, PA, USA).
US goods appear more attractive to European and British consumers.
Exchange rates effect tourism as well.
This effects Balance of Trade. It was in either Feb or March of 2005
that the USD gained strength simple because the trade deficit was predicted to
be "only" $65 billion (vs $69 billion the previous month). When it turned out
to be "only" $64 billion there was an immediate ( within 20 minutes of the
announcement) spike in the USD across the board.
With increase in exports, (decreased trade deficit) comes increase in
jobs, average worker salary, average hours worked/week, consumer confidence,
decreased inventory etc. ..... All drivers of currencies whose country they
are associated with.
2. I think it was in the spring of 2005 that Alan Greenspan began
announcing Fed rate increases. You want to see spikes in currency values .....
the first few rate hikes ----> .02 increases in USD vs every other major
currency within 15 - 20 minutes of the announcement. (Investors get 100% return
for each .01 change ... if it is in the direction they traded). Subsequent
hikes were assumed, and the USD continued to strengthen.
3. Mortgage rates were very low in 2004 + springtime/summer house building
boom was in full gear.
The USD was back from its lowest point relative to the EUR with most
of us not even noticing the trip.
The current devaluation of the USD did not start this past
Thanksgiving weekend. It started back in the end of April of 2006.
4/11/06:
EUR/USD = 1.2113
GBP/USD = 1.7425
USD/JPY = 118.71
2 weeks later (4/25/06):
EUR/USD = 1.2380 (+2.2%)
GBP/USD = 1.7840 (+2.4%)
USD/JPY = 114.54 (-3.5%)
By summer (7/10/06):
EUR/USD = 1.2734 (+ 5% in 3 months)
GBP/USD = 1.8392 (+5.5% in 3 months)
USD/JPY = 114.12 (-3.9% " ")
As of this morning 12/8/06:
EUR/USD = 1.3338 (+4.7% in 5 months)
GBP/USD = 1.9693 (+7% in 5 months)
*USD/JPY = 115.09 (USD stronger today than during the summer)
**USD/CAD = 1.1485 " " (In early July of this year the USD broke an
all-time low with the CAD, dropping below 1.12 .... 1.1096 on 7/5/06.
Shouldn't the EUR/USD being increasing faster than the GBP/USD if
there has been a selling of USD to purchase EUR?
Why has the USD gained strength against the JPY and the CAD if there
has been a divesting of USD?
The idea that I'd like to add to the current discussion is that there
are homeostatic mechanisms at work in relation to currency pairs.
Alan Greenspan's "benevolent neglect" re: the USD's devaluation in 2004
allowed these mechanisms to take effect .... they worked, then. Only after
the USD was rebounding did he start raising the Fed Rates .... more an attempt
to control inflation than to boost the USD, I think.
In an effort to help restore balance to our balance of trade, and
thereby bouy the falling USD, I crossed Pauli Girl Dark off my shopping list
and "invested" in a 12 pack of Yuengling's Original Black and Tan.
My Best Wishes to All,
Tom
----- Original Message -----
From: M&K DuPree
To: biofuel@sustainablelists.org
Sent: Wednesday, December 06, 2006 8:41 PM
Subject: Re: [Biofuel] Oil Pricing
Hi Tom...the Euro spiked against the US$ during Thanksgiving week, the
continuation of a run for about the last 6 weeks from around 1.25 to 1.33. The
"confirmation" of the Iranian Oil Bourse was stated almost as a side comment by
Mark Haynes on CNBC Wednesday morning. It wasn't a news story, per say. But
it should have been. Of course, the stuff that should be news stories seldom
is, as we all know. Otherwise, it's not the kind of news that necessarily
causes immediate changes in how the world does business. But we who live in
the U.S. should all be aware those changes are coming, dramatically, for the
U.S. Not sure what it will mean for the rest of the world. Mike DuPree
----- Original Message -----
From: Thomas Kelly
To: biofuel@sustainablelists.org
Sent: Wednesday, December 06, 2006 3:51 PM
Subject: Re: [Biofuel] Oil Pricing
Hi Mike,
I haven't seen anything re: the switch from USD to Euros or Yen.
The EURO is currently at 1.3287 i.e. 1 EUR = 1.3287 USD
I think it was 1.3317 yesterday. Any announcement of a switch to
EUR as Iran's currency for oil should have produced a spike in EUR vs. USD
.... not seen.
.
Tom
----- Original Message -----
From: M&K DuPree
To: biofuel@sustainablelists.org
Sent: Wednesday, December 06, 2006 10:29 AM
Subject: [Biofuel] Oil Pricing
I just heard on CNBC this morning, Wednesday, December 6, about
10:00amEST, that it has been officially confirmed that Iran is pricing its' oil
in Euros. There was also mention of Russia doing same as well as pricing their
oil in Yen, so both Euros and Yen for Russian oil. I have recently read
somewhere, don't remember where, so can only suggest, that along with keeping
oil in the ground, keeping oil priced in US$ is the bottom line reason for our
war in Iraq. Obviously, with the US$'s further decline, depending upon your
point of view, there is greater pressure on the US to either find ways to
militarize throughout the planet or to find alternative sources of energy.
Some might say both. Curious how the List evaluates these developments and any
additional information anyone can offer. I know Keith has posted reference to
an article by Greg Palast, "Keeping Iraq's Oil in the Ground." This article
makes a case for the US role in Iraq being the manipulation of oil prices, as
long as oil is priced in US$s. What happens, however, when oil is priced in
another currency against which the US$ weakens? Plenty of other questions to
ask. But this is a start. Mike DuPree
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