The amount of oil in storage remains above the average for this time of year, yet the oil price is now at its highest level since October 2008, when the global financial crisis was taking hold. Oil prices have risen about 11 percent this year, while crude supplies have increased by 11.5 percent.
The government also said gasoline inventories declined by 1.9 million barrels to 210.3 million barrels while demand over the past four weeks was up slightly, averaging 9.1 million barrels a day. That’s an increase of 1.8 percent from the year earlier period.
Oil prices have climbed steadily in recent weeks because the dollar has weakened against other currencies. That’s largely because of the Federal Reserve’s decision to pour $600 billion into a bond-buying program to stimulate the U.S. economy.
Since oil is priced in dollars, a weaker dollar makes it more of a bargain for buyers using euros or other currencies. Energy traders expect this to happen, so they buy oil when the dollar falls, boosting the effect.
Yet, oil was higher Wednesday even though the dollar was stronger as traders concluded the inventory decline was a sign of an improving economy. On Thursday the dollar fell against the euro and rose versus the yen.
Or is it really U.S. economic growth that they’re expecting? Consider this, from the same AP article:
Authorities in China said yesterday that factory output and retail sales both rose at double-digit rates in October over a year earlier.
As National Review‘s Larry Kudlow noted recently, using monetary policy to compensate for (meaning: hide) federal government overspending is a mug’s game.
S. T. Karnick is director of research for The Heartland Institute and editor of The American Culture.