Crude Oil = $145 (The Trichet Oil Rally)

Wow — this is amazing. It shows no sign of stopping, which of course, it eventually must. 

Here’s a question — at what point does ECB Central Bank Chief Trichet realize that every time the ECB hikes rates, it pummels the dollar and sends oil higher?

Let’s rename this the Trichet Oil Rally!

Crude Oil, August Futures
Crude_aug

via Barcharts.com

>

Previously:
The Costanza Energy Policy: 25 Ways to Drive Oil to $150 (May 2008)
http://bigpicture.typepad.com/comments/2008/05/how-to-drive-oi.html

Related:
Will Trichet drive the world over a cliff?
Ambrose Evans-Pritchard   
Telegraph, July 2, 2008, 04:41 PM GMT   
http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/07/02/will_trichet_drive_the_world_over_a_cliff

Are Trichet’s Rate Hikes 1930 All Over Again? 
Yves Smith
Naked Capitalism, Jul 3, 2008
http://www.nakedcapitalism.com/2008/07/are-trichets-rate-hikes-1930-all-over.html

Trichet Adopts Greenspan Policy as ECB Attacks Prices
Simon Kennedy
Bloomberg, July 3 2008 
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQHtTYGdxKcM&

Trichet fears worst for eurozone inflation
Gary Duncan
Telegraph, July 2, 2008
http://business.timesonline.co.uk/tol/business/economics/article4256486.ece

~~~

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What's been said:

Discussions found on the web:
  1. Pete commented on Jul 3

    “Here’s a question — at what point does ECB Central Bank Chief Trichet realize that every time the ECB hikes rates, it pummels the dollar and sends oil higher?”

    Here’s another question – at what point did the fundamentals for the dollar start to go down the drain? When the ECB started raising its rates? Trichet is an ECB banker, the ECB is controlled by Germany just like the Bundesbank used to control Europe’s central banks before it and they do one thing: worry about inflation!

    While this worry might not be justified at all times and the reaction to it certainly arguable…it is hardly the reason for the death of the dollar!

    Instead of inferring Trichet is destroying the dollar because of a pointless rise in the euro rate you might want to think about so many things that you frequently post here: the ridiculous number twisting of the main stream media, misreporting of key figures by the FED and the federal government, twin deficits, ludacris spending, excessive lending, the removal of the glass-steagall act, the total retreat of any supervisory agencies, printing money like there is no tomorrow, artificially low interest rates and of course the NO BANKER GETS LEFT BEHIND bailout philosophy the FED seems to have adapted…

    Trichet sinking the dollar? Gimmie a break!

  2. Barry Ritholtz commented on Jul 3

    Pete, are you suggesting that the ECB has no impact on the Euro, the Dollar or Oil? That’s absurd.

    No one is suggesting that the Dollar doesn’t have fundamental problems. Much of the problems with the Greenback (on which I have been Bearish for many years are home grown.

    However, at a certain point, you have to recognize that the ECB’s action is impacting the Euro/Dollar, and therefore Oil. This is not an opinion, but a simple economic fact.

  3. michange commented on Jul 3

    May I disagree?

    IMHO, the support you’re asking for would be short term and therefore useless regarding the deeper causes of the dollar’s fall.

    Please have a look at Ambac, which is the next weak link in te credit crisis :

    http://lacrisepourlesnuls.blogspot.com

    Why blame it on Europe when the astronomical American debt and the decadent US industry is the real cause for the fall of the dollar?

    Where is the point for blaming BCE not to support a short-term, much moral hazard prone, solidarity with the US government/Fed?

    Is this a capitalist country, or would you rather Europe’s largesse feed a kind of Keynesian bail out of Ambac?

    America drove the whole world economy down the cliff. It is the US structured finance deflating right now.

    I suddenly realise may sound totally unamerican right now… maybe it’s because I’m Belgian.

    FYI Merill Lynch already drove Fortis, my local bank, down the cliff. I’m much more angry with Wall Street thant the BCE.

    Sincerely, and still a fan of TBP,

  4. theyieldcurve commented on Jul 3

    People still don’t get it. I was filling up the other day when the fellow across the pump from me remarked “Can you believe these prices?”. My answer was a certified “Gas is still cheap”.

    First I made a quick remark about peak oil as if it were a familiar part of our everyday lexicon. A glazed look came over his face.

    Then I mentioned to him that gas prices in Germany are 3 times what we’re paying here at the pump. Finally, I mentioned that his SUV was probably not the best option for getting (his obese ass) around town. The conversation ended abruptly.

    I try to be a good neighbour, but I can’t help but throw sarcasm into the equation when the average Joe insists on getting his continuing education from patronizing TV news broadcasts that consistently get the big story wrong.

    There’s a geoligical reason why oil prices are where they are today. It’s time to get our collective brains off pop-culture and into gear before we turn the rest of the planet into a world class Easter Island.

  5. Aurora Borealis commented on Jul 3

    It’s China’s fault, it’s arabs’ fault, it’s speculators’ fault and it’s ECB’s fault. The finger is pointing pretty swiftly.

    Be blessed The innocents who use 25% of world oil.

    By the way, doesn’t Trichet fight the oil price inflation pretty well? Shouldn’t Bernanke join him?

  6. Turley Muller commented on Jul 3

    Its not just a weaker dollar causing higher oil prices, but also higher oil prices weakening the dollar. As long as the US imports the majority of its crude and petrodollars are being spent on skyscrapers and palm shaped islands then the dollar will continue to weaken regardless of the ECB. The ECB is just pouring gas on the fire.

  7. John_doe commented on Jul 3

    I told you BR that Trichet and the Frenchies hate the Bushies. They never forgot old Rummies “Old Europe” comments. Here is somma good news. The Europeans will decrease rates after the election, after Bush is and his stupid policies are utterly humiliated. Monetary poolicy and economic policy decisions are never made in a political vacuum. They will pay, the worst President in history…..

    The Dollar Sheik

  8. JustSo commented on Jul 3

    Exactly!
    Oil is only rallying in USD, it is actually down in EUR this week, so thanks Trichet!

    (Obviously writing from Europe)

  9. David Davenport commented on Jul 3

    No one is suggesting that the Dollar doesn’t have fundamental problems. Much of the problems with the Greenback (on which I have been Bearish for many years are home grown.

    However, at a certain point, you have to recognize that the ECB’s action is impacting the Euro/Dollar, and therefore Oil. This is not an opinion, but a simple economic fact.

    Barry, isn’t it possible that on an irrational, emotional level, the French and Germans are enjoying the triumph of the Euro over the dollar?

  10. Tom commented on Jul 3

    I’m not an expert, but wouldn’t a leveraged rise in oil price because of currency fluctuations be speculation and therefore temporary?

    And wouldn’t rising interest rates slow down the economy lowering oil consumption AND prices in the longer term?

  11. john commented on Jul 3

    Years of recklessness at the fed and at banks got us where we are. Unfortunately, deflation is what is needed to fix our currency. Interest rates are currently way negative (~-7%?) and yet credit expansion is flat. Painful as deflation may be positive real interest rates are the answer. The Europeans inflated their currency plenty over the last few years and are now paying the price. Stop blaming the Euros for trying to put their house in order.

  12. Tejvan Pettinger commented on Jul 3

    The thing is the ECB have a very strong bias towards controlling inflation at the expense of everything else. They have a lack of flexibility with current cost push factors.

  13. rikardo kurvio commented on Jul 3

    it would be brilliant move to cut a little today.

    but trichet is a bitch and got no balls for it

  14. cinefoz commented on Jul 3

    BR asked

    Here’s a question — at what point does ECB Central Bank Chief Trichet realize that every time the ECB hikes rates, it pummels the dollar and sends oil higher?

    reply: Here’s a better one. Please explain how a 1% fall the dollar causes far more than a 1% rise in the price of oil. [BR: Psychology]Oil is well over 50% more than recent memory, but the dollar is nowhere near 50% weaker. Let me guess, Chinese on the other side of the world, slap fights in Nigeria, and everything BUT long only oil investments????? If I’m wrong, then expose me, but do so with facts, not peak oil hysteria.

  15. Simon commented on Jul 3

    What happens when all the foreign dept flowing into the US treasury starts to slow or reverse…? I’ve got that sinking feeling.

  16. Aurora Borealis commented on Jul 3

    theyieldcurve:

    Exactly, the gas is still absurdly cheap in th e USA. With new environmental taxes price up and consumption down. Ultimately the producer price would come down. The taxes would also serve as incentive to new energy sources and R&D. Now the US autoindustries go bankrupt with their Hummers. What next? Personal Panzers?

  17. Andrew Foland commented on Jul 3

    “at what point does ECB Central Bank Chief Trichet realize that every time the ECB hikes rates, it pummels the dollar and sends oil higher? ”

    Here’s a question: if he’s paying for oil in Euros, why should he care?

  18. William Watts commented on Jul 3

    MARKETWATCH: A rising chorus of political criticism isn’t likely to deter Jean-Claude Trichet and fellow members of the European Central Bank’s rate-setting governing council from following through with an all-but-promised quarter-percentage-point boost in the euro-zone’s key interest rate on Thursday.

    If they hike, the ECB will be resuming a series of rate hikes after a 13-month pause. In that time, inflation pressures have mounted, with annual consumer inflation hitting 4% in June, more than double the ECB’s target of just less than 2%.

    The ECB’s sole mandate, however, is to preserve price stability.

    Such criticisms are nothing new from Sarkozy or other French officials. They’re likely to grow louder after France on Monday began its six-month term as president of the European Union.

    But a similar tone was also struck by German Finance Minister Peer Steinbrueck, who was quoted over the weekend as warning that a hike could exacerbate a slowdown.

    Economists say that while protestations from politicians are to be expected as the economic outlook worsens, the ECB and Trichet have earned reputations for jealously guarding the central bank’s independence.

    Also, German Bundesbank President Axel Weber and Bank of France Gov. Christian Noyer, who are also members of the ECB’s governing councils, are allies of Trichet and among the panel’s most hawkish members, noted Broux.

  19. pete commented on Jul 3

    wow…15 comments up from 0!

    i don’t know where to start here but as regards the initial response to my comment: of course there is an impact – this is out of the question! but you’re trichet question made it sound like he was somehow fighting european inflation while missing the point that he is sending the dollar into elysium (and subsequently the price of oil along with it). it sounded like an implication that the dollar could somehow be resuced (which is the real absurdity here) if the ECB were to act ‘accordingly’ and not rise rates.

    Let me reiterate this point, it is my conviction based on every and any piece of information that i have stumbled across over the last year that the dollar is dying. one major reason for that is the printing of more dollars (way to many dollars, in fact the current problem is that the world has passed the point of being able to sustain anymore dollars!) and this can only be countered by rising the price of these dollars – the interest rate.

    the fact of the matter is that the only reason oil and other commodities are sky rocketing is simply the need by all kinds of actors in the market to secure against the rapidly diminishing dollar which is simply going to go to zero.

    it just seemed surreal to me that given the size of the coming CDS crash (which is how many times the size of the suprime mortgage mess?) and the bond crash after it (which is how many times the size of the CDS market?) how would any rate decision by the ECB change the fact that you cannot recover from this…unfortunately Elvis has left the building…and as long as commodities like oil are priced in dollars (we’ve seen what happens if someone attempts to price oil in EUROs in the case of iraq) it will continue to go up.

  20. Mr. Obvious commented on Jul 3

    I can’t believe the people spouting “gas is cheap” and citing Europe as an example. Gas is expensive in Europe because the gov’ts over there tax the hell out of it.

    And the theory that we should do likewise, so as to destroy demand, is equally ridiculous. Perhaps, instead, if the US gov’t got their collective heads out of their asses and articulated a viable engery policy, that would move the needle.

    Instead, we have Bush and Paulson who keep telling us that “the dollar is strong” and “we support a strong dollar,” but take actions that do the opposite.

  21. Gregor Neumann commented on Jul 3

    Oh Barry,

    the price of crude is rising for at least three years now. What did poor Trichet do get this going?

    Prices will go down, if there is enough demand destruction or if the dollar is getting stronger. Since Bernanke and the FED are doing nothing, why should Trichet and the ECB?

    Europe is not the root of the problem, so it hardly seems fair to blame them for protecting their currency against the rising tide.

  22. Zach commented on Jul 3

    The question may not be whether he realizes he is pushing the dollar down, but rather if he cares.

  23. theyieldcurve commented on Jul 3

    Barry, your blog has been on my reading list for a long time. In fact, it was a big motivator for acquiring a super-automatic espresso maker for work (and in turn making mornings @ the office worth waking up to).

    But, frankly, this latest post just smacks of missing the big picture. I feel you’re seriously stuck in financial pop-culture land on this one. There’s a lot more to some of our problems than just the fiscal component. To be blunt, financial dickering and posturing between the ECB and the Fed are part of the problem, not part of the solution.

    Perhaps it’s time to start throwing in those occasional astronomical factoids again to put things back into perspective.

    ~~~

    BR: Here’s the big picture on Oil from 2 months ago:

    The Costanza Energy Policy: 25 Ways to Drive Oil to $150

    Context, people! This was a minor point that Trichet is impacting oil . . .

  24. theyieldcurve commented on Jul 3

    Mr. Obvious – Europe is a pretty good example of a culture with a better handle on conservation and solutions. We could learn something from them.

    Any energy policy we come up with will be pretty grim if it honestly takes in the gravity of our predicament. Europe is slowly but surely adopting that path.

    We have two short-term choices: destroy demand…or destroy supply. Pick one.

  25. JL commented on Jul 3

    Barry, The President told me that all we had to do was drill off of Florida and our gas prices would go down. Of course didn’t he also think that invading Iraq would lower the prices? Sorry for the snark but have you ever thought about writing a column for Bloomberg News?

  26. Michael M commented on Jul 3

    I cannot forget the great quote of Stephanie Pomboy six months ago:

    “In the Eurozone the ECB is taking their economy on a Thelma & Louise roadtrip. Pedal to the metal, they are speeding straight over the precipice.”

    http://www.minyanville.com/articles/gold-euro-Fed-ECB-bonds-yield/index/a/15736

    …bonus quote..

    “No visible means of support and you have not seen nuthin yet
    Everythings stuck together
    I dont know what you expect starring into the tv set
    Fighting fire with fire”

    Talking Heads, Burning Down the House (1983)

  27. blin commented on Jul 3

    great post!

    Here’s a question — at what point does ECB Central Bank Chief Trichet realize that every time the ECB hikes rates, it pummels the dollar and sends oil higher?

    It’s seems that you are implying that Trichet is responsible for the performance of the dollar since we all know that Helicopter Ben and Hank Paulson seem to shiver whenever they are asked to comment about responsibility for the dollar’s performance.

    Trichet is only protecting his interests and he has found that his actions suddenly are providing leadership for the real fight against inflation.

    I agree with pete, nothing more to add.

  28. John commented on Jul 3

    So we’re back to blaming the French in the shape of Trichet for all our ills. The ECB’s central remit, it’s only remit, is to ensure inflation is contained. And that’s what he’s doing god bless him. Europe’s per capita oil consumption is less than half our ours and as long as the Euro keeps strengthening he minimizes the impact of oil price rises which are denominated in dollars. Other than our usual propensity for whining, I see no good reason why he should buy into the grossly incompetent economic management that has occurred in this country over the past seven years. He’s doing his job, it’s only a pity our own central bankers have not shown the same competence.

  29. Philippe commented on Jul 3

    For years The ECB’s monetary policy has been the hostage of the Greenspan’s Fed prolixity, it is now fulfilling its mandate price stability (inflation in Europe was last month recorded at 4%) does the Taylor’s rule fit in at 4.25%? No it is still too low.

  30. Steve Barry commented on Jul 3

    Have to disagree with you Barry 110%. By your own postings over the years, inflation is understated. What is Trichet to do? Like Greenspan, ignore it and keep rates low until more bubbles form? His duty is not to America. If he has to raise rates, he has to raise it to quell inflation in the Eurozone. Should Bernanke make decisions worrying about them? No…so why should he worry about us? I’m sure Volcker heard this kind of stuff when he courageously ended inflation in the 80s. Trichet is raising rates, hopefully forcing Bernanke to raise as well and THAT WILL put a headwind on the dollar-based price of oil…doesn’t guarantee its fall, since the stupidest policy decicion (aside from Iraq) in recent memeory was to exempt freakin SUVs from CAFE standards and we are now addicted to them.

  31. theyieldcurve commented on Jul 3

    “…since the stupidest policy decicion (aside from Iraq) in recent memeory was to exempt freakin SUVs from CAFE standards and we are now addicted to them.”

    A policy decision based on rampamt lobbying by the US auto industry. Now that same industry is reaping the rewards of their own stupidity and tunnel vision.

  32. Tony commented on Jul 3

    Shorter version: Barry, you whiffed. Change the subject.

    (Still love you, though)

  33. Todd commented on Jul 3

    T. Boone Pickens was interviewed on CNBC about a month ago when oil was at $125. He commented that high oil prices were not a function of the weak dollar, rather due to the United States’ lack of an energy policy. He mentioned specifically the summer gas tax holiday proposed by John McCain and then-presidential candidate Hillary Clinton and exclaimed “this is an energy policy ?!?!?!??!”

  34. David commented on Jul 3

    BR, thanks for this blog. It is one of my go to sites everyday. I believe every comment posted in regards to this have a point. I will say that it is all inter connected in this global economy. The ECB is walking a very fine line with the rate hike, it could come back to bite them in the butt. It is part of the cause in the dollar/oil scenario, but the biggest part is our own governments incompetence.

    I wish our FED had the balls to raise rates and really show support for a strong dollar, but this is an election year.

    I am also of the opinion that the ECB and the leaders of the eurozone are secretly enjoying teaching the stupid americans and Bush a lesson……just be careful Eurozone look where hubris took us.

  35. D. commented on Jul 3

    However, at a certain point, you have to recognize that the ECB’s action is impacting the Euro/Dollar, and therefore Oil. This is not an opinion, but a simple economic fact.

    ————-

    Of course it is, short term. But, looking at the big picture, those rate increases are a drop in the ocean. Rate increases or not, the tidal wave is STILL coming.

    The reason why we are in this pickle is because Americans have just enjoyed 30 years of an overvalued dollar (since communism is dead, we don’t need the US as a protector anymore and the dollar should also reflect that) which permitted them to spend more than they made. This mentality has spread globally and we’re just starting to realize that we might not have enough commodities and resources for a global American way of life. Oops!

    When everyone in the world is vying for a way of life that is totally incompatible with their climate and geograpghy, you know there are bigger problems than a few basis point rate increase in Europe.

  36. David commented on Jul 3

    BR, thanks for this blog. It is one of my go to sites everyday. I believe every comment posted in regards to this have a point. I will say that it is all inter connected in this global economy. The ECB is walking a very fine line with the rate hike, it could come back to bite them in the butt. It is part of the cause in the dollar/oil scenario, but the biggest part is our own governments incompetence.

    I wish our FED had the balls to raise rates and really show support for a strong dollar, but this is an election year.

    I am also of the opinion that the ECB and the leaders of the eurozone are secretly enjoying teaching the stupid americans and Bush a lesson……just be careful Eurozone look where hubris took us.

  37. stormrunner commented on Jul 3

    Oil is not cheap in the US when one factors in the cost of our imprudent policing of its flows and our lack of medical and social services that Europeans enjoy due to their ability to shift their monetary flows to this end, free of this overhead.

    We as Americans can no longer afford to police the world. Empires were meant for pillaging the subjects not conquest followed by rebuilding, then turning them into Fractional Banking Quasi Democracies.

    As for the fall of the “Dollar”, these are digital dollars that have been extended – credit. These are being destroyed at a rate far exceeding anything being printed. Once a true accounting “Mark to Market” event occurs, dollars will likely become scarce. One look at municipal budgeting is projecting the deflation that is now occurring which can not be stopped. Money and Credit is in contraction. Only consumables are increasing in price, this being the result of the last sector still performing with most new FED induced flows cascading in this direction as it is the only positive yield to be found.

  38. eric commented on Jul 3

    “Here’s a question — at what point does ECB Central Bank Chief Trichet realize that every time the ECB hikes rates, it pummels the dollar and sends oil higher?”

    Here’s a better question – at what point does the Federal Reserve realize that it must do something to defend our currency, and that defending the dollar takes priority over anything else?

  39. john haskell commented on Jul 3

    The Columbian peso and Zambian kwacha have also strengthened substantially against the dollar this year. Let’s blame whoever runs their central banks for high gas prices.

    And let’s raise a toast to Gideon Gono, head of the Zimbabwean Central Bank, for his excellent effort to keep the Zim$ weak and with it gas cheap.

    What’s that you say? Oil prices are determined by supply and demand, not the unit of account? Nonsense!

  40. chris_gee commented on Jul 3

    THe debate in the comments part of the AEP column is a good read.
    Yes raising the euro interest rate will likely effect the dollar and the price of oil in dollars until demand for oil lessens.

  41. Bruce in Tennessee commented on Jul 3

    Barry,

    Usually agree with you, but maybe not this time….and even so, the question is really moot as you posed it….

    Our weak dollar is not the ECB’s fault…nor the cost of gasoline here…Trichet may come across as a grump, but I am sure he is doing what he thinks best for the ECM….

    We are not victims…of European decisions…our mess was home grown…

    Let’s see…no nuclear, no drilling, poor miles per gallon regulations, big cars and trucks, chronic deficit spending, poor FED decisions (GREENSPAN AND BEN), housing morass, etc…none of these things started in Europe….if indeed oil and gold are substitutes for a poorly defended dollar…well…

    Bruce in Tennessee

  42. kennycan commented on Jul 3

    Sorry if I am repeating something someone may have said but I have only a few mins and can’t read the whole thread.

    You’re looking at it from the wrong perspective. The ECB doesn’t care about the USD price of oil, nor should they.

    If the Euro appreciates vs the USD then the rise in the USD price of oil is muted, IN EURO TERMS. Which is the only price terms the ECB should care about.

    Matter of fact if they were more aggressive in raising rates they would be sucessful in defeating inflation IN THE EUROZONE. On the other side of that painful adjustment the Eurozone economy and finances will be stronger.

    Unfortunately it’s the same painful adjustment the US will have to undertake to break stagflation, which is raging in the US. The longer we wait the more pain there will be. Where’s the Volcker clones when you need them?

  43. kennycan commented on Jul 3

    PS T Boone’s inherently long oil. Don’t believe anything he says re the “right” way to lower oil prices. Short term he may make trades for lower prices but long term he’s rooting for $200/bbl. Then he’ll be rooting for $300. All along proclaiming the same tired old saw from the 70’s “It’s the government not doing enough (whine,whine)”.

    It’s loose monetary policy on the part of the Fed (the biggest culprit) but many of the other Central Banks in the world (to keep their exchange rates fixed to the dollar). He knows it. He loves it. He wants to misdirect you so it can continue.

    Whip Inflation Now. Excuse me while I go and put on a sweater.

  44. mh497 commented on Jul 3

    US oil inventories are 15% below last years average and Chinese heating oil imports are up.. wait for it… twenty four fold from last year at this time.

    Your witness..

  45. cinefoz commented on Jul 3

    BR titled:

    Crude Oil = $145 (The Trichet Oil Rally)

    reply: Any reason … real, imagined, printed, spoken, true, false, phony, fraudulent, from god’s lips to your ear, from Mars or further, from Jesus shaped potato chips, from Mr Ed the talking horse, from my stinking ass in a quiet room … it doesn’t take much to part a dumbass from his money.

  46. OkieLawyer commented on Jul 3

    Barry:

    If the high oil prices were merely the result of a depreciating dollar, it would seem that oil would only rise in USD. The fact that it is rising in all currencies limits the explanation to some other factor(s) in addition to — or instead of — the falling dollar, IMO. Of the other factors: rising demand and less supply (“peak oil”), speculation and terrorism premium, “peak oil” seems to have the best explanation. Three of the larger oil exporting countries (Mexico, Norway and Russia) are experiencing declining outputs.

    Therefore, I think that the declining dollar affecting oil prices is limited.

  47. michael schumacher commented on Jul 3

    you missed the boat BR….totally.

    This is just another example of blame for the weak dollar being shifted to some other entity.

    The ECB does not fire up the printing press, as we do-via the BOJ-, so naturally it needs to raise interest rates to fight inflation. This is totally a cause and effect relationship with oil being a victim of another’s action.

    How you can’t see that those greedy bastards at the NYMEX are not responsible for the bulk of the problem in oil is just your bias towards your business “friends”.

    Oil’s problems can be squarely placed at the I-banks and the Fed…..you know it, they know it however that’s not a popular stance to take.

    Total misrepresentation of the current “issue” with oil.

    Try again.

    Ciao
    MS

  48. Paul commented on Jul 3

    Crude Oil = $145 (The Trichet Oil Rally)

    I can’t understand why this is not the FED Oil Rally … Ok the ECB did move it’s rate, but the FED did not. This is a two player game.

    The ECB is acting according to it’s mandate … Ok, you may think there will be rate cuts in a near future (I do), but today they are acting as expected : trying to anchor inflation in the Euro area.

    Now the FED … Well the Fed is trying to bail out reckless homeowners & investors. Are they acting as expected ?

    This is not a rhetorical question, if they are acting as expected. Then the oil rally is a result of Central Bank’s mandate clash. If not, don’t you think, we have a Fed Equity Rally?

    disclaimer : I am European (half French if that matters)

  49. Mike in Nola commented on Jul 3

    I agree with most others in dumping on Barry. Oil prices not Trichet’s fault, but our own. Despite being polite about W, Paulson and BB in this morning’s news conference, he doesn’t really care what they think. His job is to cover the EU’s ass. He may be consciously or unconsciously producing a dollar crisis which will drive the dollar from being the reserve currency and allow oil to be traded directly in Euros since it is clearly better suited for the role at this point. This would be bad for us, but Old Europe don’t really care.

  50. pete commented on Jul 3

    @michael schumacher/okie:

    finally someone gets down and dirty to the story behind the story…talk about the big picture:)

    the key is the london ICE (intl. commodities exchange) which is a wholly-owned subsidiary of the Atlanta Georgia ICE which was partly founded by Goldman Sachs. the bush administration exempted US energy futures trading on the Atlanta ICE from regulation in 2006. In 2000 the CFTC (commodity futures trading commission) exempted oil futures trades (on Enron’s request).

    in may of this year oil stockpiles were up, demand for gas in the US was down by 6% and refiners had reduced their refinery rates. opec’s president said we will increase output IF more demand is there – oil supply is outpacing demand growth this year!

    now ask yourself: who is screaming to the world we will get to $200/barrel this year? who holds the world’s greatest oil futures position?

    this is just the icing on the cake!

  51. Niclas commented on Jul 3

    Here´s another question. At what point will Bernanke realize that every time the Fed does not hike rates, it pummels the dollar and send oil prices higher.

    Let´s rename this the Bernanke Oil Rally!

  52. michael schumacher commented on Jul 3

    Oh and nevermind the little trick played with canceling the front month crude contracts and then that amount magically shows up as a DRAW in stockpiles…

    But that would be unpopular to say since we can wave the flag of capitalism and make it all better.

    Pete-
    you got it……too bad BR can’t or won’t see that.

    Ciao
    MS

  53. cinefoz commented on Jul 3

    pete,

    thanks for joining the dark side.

    MS,

    finally, we agree on something. (I just looked out of my window to see if it was raining frogs)

  54. Mike in Nola commented on Jul 3

    Hey Barry, don’t feel bad about all the criticism, your criticism of Stossel did make the FT’s “Further Reading” blog this morning:

    FT Further Reading

  55. Sherman McCoy commented on Jul 3

    Wait a sec! At the time of this writing (11:15AM EST) the Euro is DOWN 1% vs. the Greenback. So Trichet’s early morning action is… ummm… NOT PUMMELING NO DOLLA!

    Oil is still up tho’!

  56. Larry commented on Jul 3

    Sure, the post has a valid point about the ECB’s actions and the price of oil.

    But why would the ECB care about it’s effect on oil and the dollar? And should it care?

  57. Dr. Steven J. Balassi commented on Jul 3

    Why does the price of oil have to stop rising? In the long-term, it won’t. It will keep going up until we run out.

  58. bubba in phoenix commented on Jul 3

    this isnt Trichet’s problem!! jesus christ it is OUR F’ing problem. he didnt force me to buy a home with a subprime mortgage (which i just had foreclosed). he didnt make me buy a $65k suv which gets 10mpg (which was also foreclosed on). he didnt make me buy my harley, jetski, ski boat, sand rail which waste gas(which have also all been foreclosed on).

    i dont think Trichet has to use dollars to buy oil. i think they have a thing called the euro? bet russia will take that for payment instead of the worthless dollar………….

  59. DL commented on Jul 3

    If the ECB continues to hike rates, the price of oil, as measured in Euros, will eventually decline.

    (Whatever may happen in dollar terms is another question).

  60. David Davenport commented on Jul 3

    However, at a certain point, you have to recognize that the ECB’s action is impacting the Euro/Dollar, and therefore Oil. This is not an opinion, but a simple economic fact.

    But how much has the price of liquid black gold increased in terms of Euros/barrel?

  61. VJ commented on Jul 3

    theyieldcurve,

    Then I mentioned to him that gas prices in Germany are 3 times what we’re paying here at the pump.

    An invalid contrast, as the difference is all taxation. They have taxes we don’t have, we have taxes they don’t have, it’s merely a different form of taxation.

    .

  62. Mysticdog commented on Jul 3

    Yeah! How dare Trichet put the needs of his own economy over that of the US economy. Poor Bernake, he has all of these great policies and the ECB is just hamstringing them over and over again with its selfish focus on the European economy.

  63. F commented on Jul 3

    So why is the dollar up 1% today, then?

  64. Fifi commented on Jul 3

    Eh eh, Trichet’s problem is the Euro, not the dollar or the price of oil in dollars.

    As they used to say (but the other way around): “It may be our currency but it’s your problem”.

    Yeah, it surely hurts to be on the receiving end.

  65. Alfred commented on Jul 3

    Dear Barry,
    That you call this the ‘Trichet oil rally” is a pretty sarcastic comment. I hope that was your intention because otherwise I would have to question your judgment. Since everybody in this nation seems to think that you are a financial, journalistic prodigy I will have to give you the benefit of the doubt.

    If you have to name this oil rally after somebody how about “Bush/Texas oil mafia rally”. One of the under-bosses is Dick Cheney and I like to paraphrase from a quote he made in the late 90s(a barrel of oil was $10 at that time): “There is no law that that says that oil has to be cheap.”
    Well oil is not cheap anymore but that should not confuse us because everything that goes up must come down.

  66. a different chris commented on Jul 3

    >blessed The innocents who use 25% of world oil.

    Heh. Quite a bit more, I would guess … no doubt somebody has tried figuring out the difference in oil consumed to create things we export vs. the oil we consume to make exportable products.

    Give our humongous trade defict for starters, and then looking at the type of stuff traded (the bias seems to be importing things that take lots of energy to make and exporting things that don’t)… well, that’s why I think it could well be a pct point or two higher.

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