What's Up With Oil?

Oil prices are dropping and people are beginning to wonder why. Sure, $136.64 a barrel is still ridiculously high, but it is significantly less than the $150.00 that, a few weeks ago, seemed inevitable. Furthermore, you would be hard pressed to find a period during this time of the year when oil prices dropped. This is, after all, sumer time. Summer, when people go on vacations and consume gas at its highest level during the year. Ironically, that is exactly one of the reasons oil prices have gone down. People are consuming less gas now then they typically do during the summers. Oil prices are driven by speculation -- whether or not people will be buying more or less oil in the future. The decline in summer travel is just such an indicator.

There are other factors that are affecting the price per barrel:

* A major presidential candidate has announced that he supports more domestic drilling in the United States. John McCain has stood against such expansion and his announcement has become a warning shot over the bow of foreign countries.

* McCain's statement may have contributed the to announcement by the Saudis that they may in fact increase production. That too affects the way speculators look at oil.

* Now virtually everyone is embracing alternative energy. I have noticed that even the largest oil producers in the world are now beginning to look into alternatives. Just today I saw an ad by one of America's biggest oilmen, T. Boone Pickens, discussing his company's expansion into wind energy.

* The dollar is seeing an increase in value. A strong dollar leads to lower prices, which is great news for consumers of all products and services.

The drop in prices today is at $6 a barrel. We have yet to see it at the pump as retailiers take a "wait and see" attitude. But, I believe that if the US continues to stay serious about energy independence, we will find ourselves enjoying lower gas prices and other "blessings of liberty."

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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Is the Dollar Too Weak or Strong?

Whenever the dollar becomes particularly strong and we can travel around the world for a song, buy foreign goods for a fraction of what we would pay here, and we become the currency standard for the rest of the world, we begin hearing concerns of the dollar being "too strong." Then when the dollar declines and we can't afford globe trekking, and certain countries start seeing our goods as "cheap", and the Euro begins to look like the future financial standard, we cry the dollar is "too weak."

This is indicative of the way it is with the media. They are never satisfied. More importantly, they don't have a clue of what they are talking about any way. Most journalists are in the bad news business, so when they find the economist that is advocating pro-weak dollar or pro-strong dollar, they simply focus on the one who provides the most negative spin on the economy.

For the record, a strong US dollar is always a good thing. It is better to be able to get foreign goods at a lower cost than here because it shows how valuable our currency is and is bolstered
by a highly productive economy (productivity, in relation to money supply is the primary factor for a dollar's value). A strong dollar is a good thing and knowing that is part of all our responsibility, since the media has abdicated reporting such.

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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.