"Oil contracts top $90 a barrel.
The dollar still has a long way to drop given the current massive trade imbalances. However, in this instance, we won't see nearly as much improvement in the trade flows as we have seen in past devaluations.
Combine this devaluation with flat oil production (in large part due to an inability to get Iraq, the only large and relatively underutilized producer left, online) and increasing demand from rapid industrialization in China, and the overall trend in oil prices seems inexorable for some time to come.
"flat oil production (in large part due to an inability to get Iraq, the only large and relatively underutilized producer left, online)"
My understanding, which could be wrong, is that Libya, Russia, Iran and Mexico all suffer from significant underinvestment and obsolescence in their oil extraction/exploration sector. Perhaps none of these alone makes a difference but in combination ?
Posted by: zenpundit | October 19, 2007 at 11:54 PM