Why are we paying $89/barrel for oil? Not why you think.

[Rhythm and Blue]

From Mother Jones:

Oil hit a new high today, $89 a barrel. Some analysts predict it will soon hit $100. All this has caused much anxiety in the markets and handwringing in the press, which has generally attributed the increase to 1) unrest in the Middle East 2) increased demand, particularly from China and India and 3) speculators.

All of these things are a factor to some extent. But what analysts and pundits generally fail to point out is another reason for high oil prices in the U.S. market is the devaluation of the dollar. If it weren't for that, oil would cost about $60 a barrel, as it does effectively does in Europe and Canada. On George W. Bush's inauguration day in January 2001, you could have purchased a barrel of oil for about $30. If you lived in Europe, a barrel would have set you back about 32 Euro. Because the value of the U.S. Dollar has fallen so substantially since then (it took 93 cents to buy a Euro in January 2001, it now takes $1.42), the increase in the cost of oil for a U.S. consumer has far outstripped the increase for a Euro (or Canadian, or Swiss, or just about any other) consumer.

Today, it takes US $89 to buy a barrel of oil, but only 62 Euro. Going from 32 Euro to 62 is a healthy rise, but is less than a 10% annual increase since Bush has been in office. By contrast, the move from $30 to $89 is nearly a tripling, or more than 17% per year. See this chart, where the price of oil in U.S. dollars is represented in white while the price in Euros is in red:



http://www.motherjones.com/mojoblog/archives/2007/10/5843_post_8.html

[TomInTib]

1. And if we factored in the military costs....

who effing knows what oil is really costing Americans?

The published price only reflect the "traded" price, not what it really costs the taxpayer.

[Gregorian]

8. That's an honest answer.

You don't see that very often.

I like to ask what the value of oil is. And for people to think of walking, heating their water, having lights, plastics, and the whole rest of everything we seem to take for granted. I can easily say that gas is worth twenty bucks a gallon to me. But your answer is far more important. Factor in the serious stuff. Like I've always said, war is our way of subsidizing the low price of oil.

[dweller]

2. the new kids on the block

ethanol, and biodeisal are giving the US oil oligarchs a run for the $$ also.
While the price $/barrel is increasing, the average $/gal has remained ~$2.759 (in my area) for a few months.

i wonder why that is?
dp

[charlie]

3. It's because the earl-man twerp in the WH

hasn't gotten on the horn with the A-rabs and jawboned them into openin' them spigots. Simple as that.

At least, it was that simple in 2000, when he couldn't buh-lieve earl-iggerant Clinton was letting 'em get away with $30bbl earl.

[Hydra]

4. 10% compound increase is not healthy, by any measure

32 -> 62 euros in 6 years is NOT good.

[depakid]

5. Irrespective of the units of measure

The moving average will continue to steadily rise- though the peals and troughs may be driven by all sorts of factors.

[Hydra]

6. sure, at more like 3% or at least in uniform fashion to the rest of the economy

[depakid]

11. Not considering that the evidence show we're likely past peak production

and demand from countries like China, India and others soars even as the US continues its wasteful "non-negotiable lifestyle," 3%'s a pipe dream.

[Liberal In Texas]

7. I believe it was Hartman the other day who said that letting the dollar devalue like it is is a way

of dealing with the huge debt that the *ies have gotten us into. However, this way of paying back debt with cheaper dollars could cause massive deflation or a depression. We are seeing deflation happen before our eyes.

Buy euros. That is if you can.

Recommended.

[Solar_Power]

9. We should send a collective bill to Turkey

They caused a $10 jump in oil prices.

Someone should bill them for it.

[Generator]

10. Yep we are fast becoming the whole banana republic

Are money is worth sod all. I'm starting to feel a trapped feeling-the old "we can move away" meme is now really false. Between homeland security and all the nightmare of flying-I guess we are stuck here with our worthless dollars. America-the new Cuba.

[gatorboy]

12. What did we think it was?

[RB TexLa]

13. Pretty simple: Buy oil futures and Euro CDs

There hasn't been a good reason to invest in US dollars or a dollar based stock in a while.

[clu]

14. nice

k+r

[Duppers]

15. most people haven't a clue about how badly this will impact

us in the next few yrs. The next admin will have a disastrous economy to deal with.