Falling Oil Prices: Worrying Trend or Saving Grace?
By Marin Katusa, Casey Energy Team
When oil prices start to decline, investors and economists get worried. Oil prices in large part reflect global sentiment towards our economic future – prosperous, growing economies need more oil while slumping, shrinking economies need less, and so the price of crude indicates whether the majority believes we are headed for good times or bad. That explains the worry – those worried investors and economists are using oil prices as an indicator, and falling prices indicate bad times ahead.
But oil prices have to correct when economies slow down, or else high energy costs drag things down even further. And the current relationship between oil prices and global economic output is not pretty. In fact, every time the cost of oil relative to global production has hit current levels – and that’s after the sharp corrections earlier this month – an economic slump, if not a recession, has followed, according to a Reuters article.
The “warning signal” that is currently flashing red is the Oil Expense Indicator, which is the share of oil expenses as a proportion of worldwide gross domestic product (specifically, it is oil price times oil consumption divided by world GDP). Since 1965, this indicator has averaged roughly 3% of GDP and has only exceeded 4.5% during three periods: in 1974; between 1979 and 1985; and in 2008. Each period saw severe global recessions. Continue reading
Casey Research Identifies Next Generation of Resource Leaders with Casey’s NexTen
Stowe, VT, October 12, 2010 – Casey Research, a leader in providing in-depth, independent analysis of high-growth investment opportunities, announced today Casey’s NextTen, the next generation of leaders in the natural resource industry.
Successful investors, like Casey Research founder Doug Casey, have long recognized that there are no more important considerations when investing than the people. For years, Casey Research has helped its subscribers succeed by closely following the careers of the most successful explorers in the industry, those top few percent who consistently generate the majority of returns for shareholders.
And now, it is proud to present the next generation of industry leaders to keep a close eye on — the top 10 up-and-coming resource stars 40 years and under who are already demonstrating a strong track record in innovation, exploration, and financing – Casey’s NexTen. Continue reading
Oil and Price Inflation
I recently received the following question from a student in Malaysia. I thought it was a good question so I am including it here.
Dear Sir,
Greetings, I am a student of International Islamic School Malaysia, Kuala Lumpur. I hope you are well. I am in grade 10 and I take business studies as one of my subjects. Recently I had a class on inflation in my school. The teacher said when fuel prices alone rises we cannot term that as inflation. I disagree with that because I think that rising fuel price is the only exception where we can say that it is inflation. When fuel prices increase the price of all other commodities increase … please tell me if it is right or wrong to say that ‘high fuel prices is inflation’. I would really appreciate your help.
Thank you.. Samin
Dear Samin,
That is a very thoughtful question. Often professors, analysts and the news media remove Energy and Food prices from the “inflation equation” because they are so volatile (these prices change a lot in the short term) without them it is called “core inflation”. Continue reading
Inflation, Oil and the Environment
I recently received a great question from a 6th Grader on Inflation, Gas Prices and the environment all rolled into one. It isn’t often that 6th graders think about these issues so I would like to share my response with you…
To whom it may concern,
My name is Sam and I am a 6th grade student at (deleted) Middle School. I love traveling. Whenever I go places I see lots and lots of poverty. I think to myself why? Than I look ahead of me and see the outrage sky high prices for food, gas and many other things.
You may be wondering why I’m telling you this .I’m doing a project on one of the things that you know a ton about. My subject is inflation of consumer and gas prices. As I think about the fact that gas is so expensive. I also think about why.
Than I remember that they are destroying habitats for animals. As the thoughts run through my head I wonder how can I stop this. This is my whole point of my project. I also realize that the demand for gas is very high. But the bigger demand the more wildlife is cut down and the higher the prices go. If this cycle keeps going on than the some people wont be able to offered to heat there homes or drive too work or even feed there family. Please send me as much information as you can so I can complete my project.
Thank you,
Sam
Dear Sam,
Thank you for the well thought out letter. It is good that you are thinking about inflation, Oil prices and the environment. Unfortunately it is a very complex subject so I will start with inflation. Continue reading
