Oil has been the main talk of the Street on Friday after the prized commodity spiked and then pulled back. Currently, it still sits higher after a report that Iran has had a sharp drop in exports. Reuters reportedly said that Iranian oil exports have fallen by 300,000 barrels per day this month.
Oil jumped about 3% when the news hit and the commodity reached as high as $108.25 a barrel, the highest price in three weeks. However, the spike has cooled to $106.92 or up 1.4%.
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Readers can see a chart below of the popular ETF, United States Oil Fund LP (ETF) (NYSE:USO), which tracks oil below:
Conflicts within the Middle East and Africa have sharply raised crude oil prices as uncertainty and turmoil dominate the region. President Obama commented earlier this morning on the issue, saying that continuing Middle East tensions could give oil another $20-$30 boost.
This is obviously not what the American consumer wants to hear. The recent drop in consumer confidence was due to the rising prices of crude which are beginning to have a strangle hold on the US economy. Consumer spending makes up over 60% of our economy which makes this report essentially a bearish signal for the US economy if things are not corrected soon.
When oil prices begin to rise, people get angry and want to blame someone but whom? Should you blame President Obama, oil speculators or Iran? Lets finally put this issue to bed once and for all. The recent spike in oil in 2012 is not President Obama’s fault. Some say he could tap the oil reserves
and help bring relief. Last week the President and Prime Minister Cameron both agreed to tap oil reserves to bring relief to the rising prices at the pump, which means Obama can’t do a whole lot more. Oil speculators get blamed all the time for the rise in oil which is not all entirely warranted. Although they may make the move in the price easier and do contribute to the volatility, the problem does not originate with the speculators. The real problem here is Iran. Obviously, when you cut oil exports by 300,000 barrels a day, you are going to have excess demand which means prices will rise. This is where the problem originates and where the rising prices come from.
We are in a tight spot right now and in the coming months. If we do not find ways to bring down the prices at the pump, it could derail all of the recovery and send us right back to a recession. We can not allow it to get that bad, we must be able to give the US consumers some relief so that they are not discouraged and stop spending.