We are continuously told that crude oil prices are to hit an all time high because the shortage is due to oversupply and they are done in the name of artificial demand. But this artificial demand is having negative impacts on US jobs data as to topping signs remain.
All that the economy can offer to consumers is what the market can offer them, which has been the apparent result of obvious fact. Hence, it cannot continue to be a case of keeping the lights on and eating. It’s as simple as that.
Indeed, everyone has been saying that we have a shortage of supply of oil, but we have been told that it’s for a given period of time and the economy can weather such a scenario because there is a constant annual increase in energy production. However, this continuous increase in demand is not being met by the means of energy production.
We are getting close to the peaks where the demand is increasing but the oil industry is meeting the supply at a lower rate and this is where the problem lies. We are just not going to make it meet the existing demand when the supply exceeds the demand.
The lack of supply is a real economic concern and the effect is that there is a slump in the consumer spending cycle and the consumer spending is what helps create the American jobs data. One important thing to remember is that it has to remain a problem until something changes.
The consumer spending is the lifeblood of any economy and the world over and when the economy is suffering from lack of investment and high unemployment there will be a massive slump in consumption. The effect will be felt in terms of the US job data asto topping signs remain.
The government’s view on how the oil industry should respond remains the same, as they always do, but it has to be in the real sense and not to please people in Washington DC who in the end never seem to have a clue on how the world really works. The best example of this is in the case of the US shale industry, where the industry says that it will have to sell assets to survive and this will keep the oil price low.
But there is no clear message coming from the Federal Reserve about whether they will raise interest rates before this problem occurs or if it will occur sooner rather than later. There are too many surprises coming from the Fed and that is the main reason that the job market remains in a slump even though there is a growing level of unemployment.
It appears that the lower prices of crude oil are to help the situation in the oil sector, because at one time oil was a very low-priced commodity and there was a large amount of money on the table in this sector. This money was used to bail out these companies that were facing a money crisis and so it made sense that their costs were also reduced to keep the costs down for consumers.
The fact that crude oil prices are to rise does not mean that the crude oil sector is in trouble and that natural gas is doing better because there is a considerable difference between the prices of crude oil and natural gas. Natural gas is cheaper than oil and the US economy is dependent on the use of natural gas for the transportation of goods.
It is quite possible that it will have to be kept a bit higher in the air and that this will be good for the US economy. Some countries would not be able to compete if the oil prices were to shoot up because they need to bring in more oil to replace the ones that are lost through the shortages and they will suffer because this will put a severe hit on their economy.
There may be a rally before crude oil prices come back up, but the bottom line is that the supply is not meeting the demand, which is causing problems for everyone who uses the energy sector. including the US government and the US economy.