oil

Israel vs Palestine

Could a Hamas vs. Israel War Trigger a Worldwide Recession?

According to a recent article by Bloomberg entitled, Wider War in Middle East Could Tip the World Economy Into Recession, it is a distinct possibility. The article presents 3 possible scenarios, i.e., Confined War, Proxy War, and Direct War. Confined War Scenario In the confined war scenario conflict is limited to Gaza, Israel, and the Palestinian […]

Could a Hamas vs. Israel War Trigger a Worldwide Recession? Read More »

Dollar Dominance

More Cracks in U.S. Dollar Dominance

Back in 1933, Roosevelt forced Americans to sell their gold to the government for $20.67 an ounce and then promptly raised the price to $35/oz. Thus he presided over a 69.33% gain in the value of gold which was equivalent to a 69% tax on the ownership of gold. Then at the tail end of WWII, Roosevelt pulled off the Bretton Woods agreement that made the U.S. the dominant world currency. When that began to fail Nixon cut a deal with Saudi Arabia instituting the “Petrodollar” which once again put the dollar at the top of the heap. But now some cracks are once again emerging.

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The red line on the chart shows Illinois Sweet Crude oil prices adjusted for inflation in February 2022 dollars. The black line indicates the nominal price (in other words the price you would have actually paid at the time). The current price for a barrel of Illinois Crude Oil as of March 11, 2022 was $84.70, up significantly from recent lows.

In What Universe is $100+ Crude Oil Cheap?

Everyone knows that Gasoline and Crude oil are currently expensive right?  I recently updated several of our charts and when I got to the Crude Oil vs Gold chart I was in for a shock. According to that chart either Gold is expensive or Crude oil is cheap. Not as cheap as it was in 2020 but still historically cheap but it is actually simply approaching the long-term average ratio.

The thinking of the ratio is this… if the value of dollars is constantly changing the best way to tell if a commodity is expensive is to compare it to other commodities. Historically, gold has been money so what better commodity to compare to? 

Looking at the chart of Gold vs. Oil we see that oil is still relatively cheaper than gold. Now as we have said many times Gold is a Crisis hedge so in times of crisis, gold appreciates. Therefore, we would expect gold to currently be expensive and it is, but it is not currently at all-time highs. Read the Full updated Gold vs. Oil Article here.

In What Universe is $100+ Crude Oil Cheap? Read More »

Oil vs Gold Chart

Which is Over Priced? Oil or Gold?

Was gold in a Bubble? Does the recent correction mean anything? With the value of the dollar constantly changing it is hard to tell what it all means. After all, can you imagine trying to build a house if every day when the workers arrived you gave them a different size ruler?

With everything from lumber to bitcoins skyrocketing in price (or the dollar devaluing), is there any way to tell the real value of something? How much is anything really worth? Is Oil overpriced? How about Gold? Is it overpriced? Is it cheap now that the price has come down? Looking at these commodities in the standard way, it’s often difficult to tell.

Which is Over Priced? Oil or Gold? Read More »

The Future of U.S. Energy Independence

Historically, access to energy has been of strategic importance as countries that are not energy independent are subject to embargos, shortages, and political blackmail. In years past, wars were fought over land that produced oil and gas, but more recently we have seen battles like those in Ukraine where the battle was for the land that held pipelines transporting the gas. So, one reason that being energy independent is so important is that it makes your country more secure. But it also makes it less susceptible to price increases.

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Oil Majors That Bet Big On Renewables

Big Oil has frequently been chided for merely trying to burnish its green credentials, and so far, it has done little to convince us that it is truly moving forward to greenness. Despite the much-vaunted megatrend involving the global electrification drive and shift to renewable energy, the most ambitious pledges by Big Oil to pursue net-zero agendas remain weak at best.

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World Oil Production

Oil Demand Impacts Foreign Exchange Rates

To say that the past year has been an extraordinary period for the global oil market would be an understatement. Entering into 2020, the commodity was still feeling the impact of the late 2019 drone attack on a Saudi Aramco oil processing facility. In early 2020, oil prices were highly volatile in the aftermath of the killing of Iran’s Qasem Soleimani.

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Oil Is Now More Volatile Than Bitcoin

You know that the oil markets have truly gone to the dogs when they are suddenly riskier than one of the world’s most volatile commodities: bitcoin. Bitcoin and most cryptocurrencies are synonymous with extreme bouts of volatility. However, it’s crude oil that is now earning that dubious distinction after exhibiting price swings wilder than even the leading cryptocurrency.

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