Oil Prices Rise on Financial Rebound

“For every action there is an equal and opposite reaction.” - Newton's Third Law

Isaac Newton's laws of motion would seem to have no application to the world of paper money, but the rise in the stock market Monday did not occur in a vacuum. Oil prices driven by market confidence became much more valuable, rising $3.49 to close at $81.19 on the New York Mercantile Exchange, according to CNN Money.

Investors were encouraged by actions taken in both Europe and the United States to stave off economic recession by shoring up their battered financial and banking centers. The demand for oil has dropped markedly in recent months as cash-strapped consumers drove less and cut back on all the unnecessary waste of gasoline or other oil-based products. Though our current price level – hovering near $80 per barrel – is a far cry from the $147.27 peak witnessed in July, we are still paying more for oil now than at any point in our history.

The Organization of Petroleum Exporting Countries intends to meet in an emergency conference in Geneva, Switzerland this November in order to address what it sees as a problem. OPEC stands to profit whenever oil trades above the $40 per barrel range, at $140 per barrel, they raked in profits of magnitudes higher than expected. Many believe that OPEC would like oil to trade at around $110; just high enough to reel in massive profit margins and just low enough to keep consumers on the road and away from oil alternatives.

Most Americans would disagree. They prefer lower gas and oil prices, but are unwilling to make the changes necessary to keep prices low. At some point in the not too distant future oil prices are going to skyrocket, regardless of our actions to stop it, so we might as well do what we can now to keep prices as low as possible.

Most industry analysts believe that oil prices will remain relatively stable – between $85 and $100 – as the world’s economies stumble toward recession. Oil consumption declines during recessionary periods, as productivity and employment drop.

The modest jump in oil prices is not immediately threatening, but it does represent an important lesson to be learned: prosperity comes at a cost. As stocks have flat-lined and confidence has faltered, the one bright spot in the economy was the declining price of oil. A turnaround on the market would reverse this effect and drive prices back up. Consumers would stop worrying about the price at the pump if they had money in their wallets and America would continue its disastrous oil addiction.

Source CNN Money:

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