Current Oil Price

[raspberry-blower]

Oil and US Dollar back up, prices fall in response to the turmoil in Egypt:

http://www.bloomberg.com/news/2011-01-2 ... lides.html

Brent spot at $98.75

[PS_RalphW]

Now we have three grades over $100 on the spot market.

Brent futures front month briefly topped $99.90 early this morning.

[Andy Hunt]

$100 oil and a contracting economy.

What can it all mean.

[kenneal - lagger]

What can it all mean.

I'm sure RGR knows and his parrot, Meemoe, will regurgitate the answer as well.

[PS_RalphW]

Looks like Brent just passed $100

http://www.bbc.co.uk/news/business/mark ... traday.stm

[kenneal - lagger]

What can it all mean.

From Peak Oil Review

....... On Friday, however, the seriousness of the demonstrations taking place in Egypt and other Middle Eastern countries set in and oil prices surged $3.70 a barrel in NY to close at $89.73 on fears that the protests could spread to other oil-producing countries. In London Brent crude rose to a daily peak of $99.63 a barrel, the highest level since September 2008. Friday saw the biggest one-day jump in crude prices since September 2009.
Although Egypt produces only 670,000 b/d, the Suez Canal and the accompanying Sumed pipeline moves some 2.9 million b/d of Middle Eastern crude and products to European and other destinations. So far there have been no indications that the demonstrations to unseat Egyptian President Mubarak have slowed oil production or transport in the region.

and also

During the week, the gap between NY oil prices, which at one point were approaching $85 a barrel, and London prices, which closed near $100, increased to an all-time high of more than $12 a barrel. The problem remains at the NY futures delivery depot in Cushing, Okla., where Canadian oil arriving by pipeline crowds out tank space supposedly set aside for delivery of oil from expiring NY futures contracts, thereby pushing down NY oil prices. In London futures settlements are in cash so there is no need to deliver actual oil. Most observers are now saying that the Brent benchmark represents the current value of oil and that NY prices are a temporary technical aberration.

[PS_RalphW]

Five grades of oil over $100, spot price.

[PS_RalphW]

This should guarantee a recession

http://www.guardian.co.uk/business/2011 ... arles-bean

Rising interest rates if the price of oil does not come down.

Then we will have massive mortgage and credit card payments as well as massive petrol bills.

£1.32/litre to fill up yesterday.

[kenneal - lagger]

I can't see how raising the interest rate will stop inflation when the pressure for price rises comes from abroad in the form of higher fuel and food costs. It's not wage inflation causing the problem or increased home manufacturing costs.

If the base rate goes up there should be an increased tax on the banks because they will make a windfall profit on the increase.

[Blue Peter]

I can't see how raising the interest rate will stop inflation when the pressure for price rises comes from abroad in the form of higher fuel and food costs. It's not wage inflation causing the problem or increased home manufacturing costs.

Since some of the price rises are coming from the fall in sterling, then making sterling more valuable by increasing the interest you get for holding it, might raise the price of sterling and so cause import costs to fall.

If the base rate goes up there should be an increased tax on the banks because they will make a windfall profit on the increase.

Not necessarily. A bank's profit is the difference between the rate at which it borrows and the rate at which it lends (multplied by how much it's borrowing). Since banks traditionally borrow short to lend long, a rise in interest rates will tend to increase their cost of borrowing more than their costs of lending (assuming that a significant amount of their lendings is fixed), so, it should squeeze their profits.

One view is that the low interest rates are basically a way of taking money from savers and giving it to the banks, since their lending rates remain high (so that the gap between what they borrow at and then lend at is at a high).


Peter.

[raspberry-blower]

Brent breached $103 earlier today - WTI still lagging behind.

In other commodity news, copper breached $10,000 a tonne:

http://www.bloomberg.com/news/2011-02-0 ... climb.html

[DominicJ]

I can't see how raising the interest rate will stop inflation when the pressure for price rises comes from abroad in the form of higher fuel and food costs. It's not wage inflation causing the problem or increased home manufacturing costs.

Since some of the price rises are coming from the fall in sterling, then making sterling more valuable by increasing the interest you get for holding it, might raise the price of sterling and so cause import costs to fall.

If the base rate goes up there should be an increased tax on the banks because they will make a windfall profit on the increase.

Not necessarily. A bank's profit is the difference between the rate at which it borrows and the rate at which it lends (multplied by how much it's borrowing). Since banks traditionally borrow short to lend long, a rise in interest rates will tend to increase their cost of borrowing more than their costs of lending (assuming that a significant amount of their lendings is fixed), so, it should squeeze their profits.

One view is that the low interest rates are basically a way of taking money from savers and giving it to the banks, since their lending rates remain high (so that the gap between what they borrow at and then lend at is at a high).
Peter.

+1

[kenneal - lagger]

Just seems strange to me that bank's profits seem to rise dramatically when interest rates go up.

[DominicJ]

Do they?
It does create something of a sellers market for credit, in theory, but if base interest rates are pushed up to 3% this year and 5% next, the banks will be wiped out by defaults regardless of the amounts they can screw from the few remaining solvent debtors.

The Reaganoughts like Gordon Gecko and the Thatcherite "Loadsa'Money, look at my wodge" crowd didnt turn up till the late 80's.
The early years, when interest rates were jacked up to control inflation, were extremely painful. Average House prices fell from £70k to £50k, not much better than the ERM disaster and unemployment grew as well.

Sticking "bank profits 1970-1990 UK" into google doesnt reveal much unfortunatly.

[adam2]

Another oil tanker hijacked by pirates
http://www.bbc.co.uk/news/world-africa-12403528
May drive prices up.