The bailout completes a trillion-dollar gift from tax payers to maintain some semblance of the US financial sector of the past few decades. The era of investment banks has ended, beginning what may turn out to be an era of inflation and weak dollars. This dollar weakness catapulted the oil price to as high as $130 per barrel, causing the NYMEX trading floor to suspend trading briefly since prices’ record rise was more than the one-day limit.
Other bullish news came from the Gulf, as less than 25% of its oil production has returned post-Ike. We are almost 10 days away from Ike’s landfall and crude and gasoline inventories will probably continue to slip into extremely low territory for at least another week. Shortages look to persist through the week for areas in the Southeast. Wednesday’s oil report should be an alarming sight…
And last but not least, Mexico reported that their national oil output fell further last month. The rapid fall in production at Cantarell and other old fields shows little sign of slowing as Mexico oil exports risk falling more than 40% over the next two years.
The overall situation is a supply side that is struggling matched by an almost equal stagnation in demand that leaves oil prices reaching up and down for an equilibrium point somewhere around $100 until the next major event shifts demand, supply, or the value of the dollar.
Onwards to a sustainable energy transition that brings more stability to these volatile energy markets-
Tags: financial bailout, Hurricane Ike recovery, Mexico, oil prices