March 17, 2008 at 2:00 pm by Tom Lydon
The price of oil took a step back on Monday, causing its related exchange traded funds (ETFs) to head south along with it.
John Wilen for the Associated Press reports that oil dropped $4.17 to $106.04 a barrel after hitting a high of $111.80. The price of diesel fuel rose to a new record, above $4 a gallon, and the price of a gallon of gas stayed high.
Some analysts are saying the oil is in a bubble - especially since the price keeps rising, but demand growth predictions have been lowered and supplies are higher.
Oil ETFs were down in trading today. Will there be a rebound, or are investors beginning to get skittish?
March 20th, 2008 at 7:53 pm
The economic value of oil ( pure supply & demand) is probably about $75 - $80 per barrel. For a long time there has been a terrorist premium of about $10 - $15 per barrel built into the price. This has been, and is, to cover contingencies such as violence in Nigeria, loony actions in Venezuella, etc. I believe everything above the price of $95 per barrel reflects investors using oil as a quasi hedge against the weakening dollar. As the dollar shows some strength it will probably be reflected in an immediate drop in the oil price.
Tom