Oil: We're Swimming in It
The Energy Information Administration, the government's statkeeper on oil, gas and other energy, just released its weekly report showing that oil inventories rose by 5.6 million barrels for the week that ended Oct. 10. It's a bigger surplus than analysts expected.
Yep. Gas prices over $3.50 per gallon for most of the summer will do that to inventories.
High inventories drive down the price of crude, which has dropped below $80 per barrel, significantly less than its price in June, when it hit $140 per barrel.
This creates a good news/bad news situation for consumers.
The good news: The national average gas price is almost below $3 per gallon.
The bad news: If people lose their jobs and/or their homes, they won't be driving anywhere.
A recession: one way to reduce our dependency on foreign oil.
This translates exactly to the wider economy. Trucking companies are thrilled about dropping fuel prices. But if they have nothing to haul, there's no point in cheap diesel.
And the plummeting oil prices impact widely through the markets and the economy. Take a look at the stock prices of four of the biggest U.S. railroads -- CSX, Union Pacific, Norfolk Southern and Burlington Northern Santa Fe -- as oil prices have halved.
Since peaking in late August, the value of all four railroads has dropped steadily. Why? Railroads love high oil prices because it means more freight moving from trucks to rails. When oil prices go back down, railroads lose both tonnage and share price.
-- Frank Ahrens
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