Could a US Default Push Oil Prices Above $130?

Oil, priced in dollars, tends to move higher as the U.S. dollar falls, and vice-versa. It's a result of oil traders trying to maintain their "purchasing power" in the event of a weaker dollar. Oil closed Friday down $1.58 to $95.86 per barrel.

Now if Democrats and Republicans in Washington can't reach a debt deal agreement and the U.S. Government defaults on its debt, the dollar may very well decline, boosting oil's price.

So far in the debt crisis, the dollar has held its own versus the euro, trading at $1.4410, but has declined versus the yen, to 76.84 yen, and the Swiss franc, to 0.7856 cents.

Further, if the U.S. Treasury Department has to postpone certain payment because it legally can not borrow money because the debt ceiling isn't raise, investors would likely drive the dollar lower against the world's other, major currencies.

How low could the dollar go? Different stress test modeles reveal different weaker-dollar scenarios. What's important is that a 10% decline in the dollar would probably push oil above $120 to $125 per barrel.

Add the start of the fall heating season in the northern hemisphere -- when oil demand historically rises -- and any additional trouble in the world's oil producing hot spots ( growth is expected to decrease oil demand in the gas-guzzling U.S., but if economic expansion re-gains steam, that would represent another oil-bullish factor.

Energy/Economic Analysis: An oil price above $130 per barrel would represent more bad news for U.S. motorists. Gas prices, which Friday averaged about $3.70 per gallon for regular unleaded, would rise substantially.

Gas prices rise about 2.5 cents for every $1 per barrel increase in the price of oil, so a $120 oil price would push U.S. regular unleaded to about $4.20 per gallon; a $130 price, to about $4.55 per gallon.

In addition, the U.S. economy would hurt. Every $1 per barrel rise in oil decreases U.S. GDP by about $100 billion per year and every 1 cent increase in gasoline decreases U.S. consumer disposable income by about $600 million per year.

To be sure, the flexible and resilient U.S. economy is more-energy efficient today that it was 10 years ago -- even five years ago -- and it will likely become more efficient in the years ahead, but that doesn't blot-out the fact that the U.S. remains an oil-dependent economy. Most cars still run on gasoline, trucks on diesel, and oil is also a major fuel for heat. Hence, sustained, high oil prices translate in to bad things for U.S. motorists, U.S. GDP, corporate earnings growth, and by extension, for most U.S. stocks.

Oil prices fall with rising consumer frustration with the comment ...

The Voice of China “News” reported, most recently, eastern and southern China’s refined oil wholesale price seems to have signs of loosening, so the expectations of the retail prices suddenly rise again in the minds of consumers. However, contrary to expectations, the price of gas stations around the table remain absolutely still. One wonders why the issue of falling oil prices, the petroleum, petrochemical this “barrels of oil” is always slow it?  

Lately, east, south part of the oil provinces of the average wholesale price per ton fell by 600-800 yuan. Reporters in Shandong survey also found that, on July 28, Jinan Great wholesale price of 93 gasoline refineries in 8650 yuan / ton; than May 4 of 9470 yuan / ton, down 820 yuan / ton. Jinan refinery is not a case of the Great Wall. May 4, Dongying, Shandong Group is the second year and 90 # gasoline wholesale price of 9250 yuan / ton, July 28 dropped to 8370 yuan / ton, down 880 yuan / ton. Shandong Zibo a refining industry insiders Jia told reporters in recent months, Shandong to the oil refining factory wholesale prices fell by an average of 800 to 1000 are:

Ka: low demand, this is the first reason, according to previous years, look at it, this is the gasoline and diesel demand for off-season; also been declining crude oil prices, refinery ship out without moving the price has to fall from the previous month or of 1000 dollars.

HAN Xiao-ping, director of China Energy Information Network, told reporters, wholesale prices, the market is extremely sensitive to the private stations immediately have a reaction, have cut retail prices to attract consumers, some local gas stations in some of the oil in which:

HAN Xiao-ping: see some places are up, as in some gas stations are now some cheap oil to 2 cents, 5 cents and some cheap hair 2, the more expensive private gas stations, up to 6 we have also seen cheap hair money around.

And private gas stations in stark contrast, almost all in the petrochemical, oil and most gas stations in the retail price of oil is still “stays.” A gas station in Jinan Sinopec, 93 # gasoline sold 7.50 yuan / liter, 97 octane gasoline sold 8.05 yuan / liter, with exactly the same in May, still in the implementation in early April when the oil price adjustment to determine the maximum retail price. Mr.

The oil factor, protect yourself--and profit--from the coming energy crisis

Congressional record, proceedings and debates of the ... Congress

Two billion cars, driving toward sustainability

Congressional Record

The Oil and gas journal