Is it really all oil price fault?

Stock markets all over the world are dropping, and many experts are pointing oil price rise (that is getting near $100) as the cause. Surely many industries are affected by the oil price rise, but we have to point out that oil price rise depends also from dollar weakening, as we have highlighted some time ago.

In our opinion, things should be seen under a different point of view. Oil price was expected to rise, since is known that India and China economies are growing at a fast pace, and while a few years ago they exported energy, now they import it, increasingly, whit inevitable consequences on oil price. By the way, we have to say that there are cure worse than disease, as the run to biofuels, since these on one side can’t substitute a relevant percentage of oil consumption, while they take away room for food agriculture, with effects on food prices and inflation — and maybe these effects are the secondary ones: in Brazil there have been riots again biofuel producers, caused by hungry people.

But back to the topic, as we said oil price is rising because dollar is weakening, and this is probably caused by a slowing in the US economy, that has been “doped” in the last years, but now the very sector that hauled economy (finance and housing) are now strained, since they were boosted more than what they could sustain. And today US economy looks today like a giant with feet of clay.

In this scenario, a correction isn’t completely negative, since getting close again to “fair values” is an essential condition for a solid future growth.

Original post (in Italian): Ma è davvero colpa del caro-petrolio?

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