What Is Affecting Oil Prices? With Dan Eberhart May 6, 2018
Guests: Dan Eberhardt and Dee Carter
The Income Generation With David J. Scranton
That makes a lot of questions difficult to answer including all of those related to rising oil prices. And as we just pointed out, the rally we’ve seen since 2016 is a result of huge surplus reserves being eventually sold off as the demand has somewhat risen and is somewhat improving economy. The biggest factor, of course, is the sell off of the demand but with overall inflation, which I’ll discuss more later on in the show, there comes a point when rising prices become prohibitive and start to slow economic growth. Businesses that rely on transportation, for example, such as airlines and shipping companies can begin to struggle when oil prices cut too deeply into their bottom line. Oil refineries are also susceptible to lower profit margins when prices get too high. And of course, higher fuel bills can also produce the discretionary income of consumers like you and me. So, with the oil rally so far, it seems to have been mostly celebrated as a sign of economic progress. But even though that’s the case, analysts are watching certain factors very closely. Factors that could now cause demand to outplay supply and jack prices up even further to that crippling level. Not surprisingly most of those factors are geopolitical in nature. You know, the oil market always watches the political realm very closely for potential risks of supply disruptions. Right now, you don’t need me to tell you that there are quite a few of them potentially on the rising. The most pressing is the possibility, of course, of President Trump making good on his threat to withdraw, withdraw for example from the Iran nuclear deal and reimpose sanctions on its oil exports. He’s expected to make a decision on the issue by May 12th. Another issue is the economic and political crisis in Venezuela for example which has already caused oil output to fall by at least, 500 thousand barrels per day. And there are similar crisis in both Yemen and of course, Libya, that can lead to supply disruptions. In fact, one senior oil analyst recently told the financial times that geopolitical risks in the oil market were “as high as he could remember” but on the flip side of all this analysts are also closely watching factors that might potentially offset the supply threats posed by all these conflicts abroad.
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