Uh oh! Oil down and the dollar up. Why?

Since George Bush rescinded the federal moratorium on off-shore drilling and since demand for higher domestic production has increased in the face of $5 per gallon gasoline, the price of crude has dropped over $20 a barrel in less than two weeks.  The stock market has improved (albeit tepidly) and the dollar has strengthened at the same time (very slightly).  Of course, the threat of Israel bombing Iran was a bit premature and overblown as were the troubles in Nigeria and with their pipelines. 

A lot of factors went into these changes and they all came about at the same time.  However, it cannot be avoided; the fact that off shore drilling was a tad bit closer to being realized caused the markets to shift.  With some announcements of late that are saying some of these fields could be producing oil in only two years, the outlook looks a little bit rosier.  True, the Democrats are doing everything in their power to avoid this reality and the latest bill that goes after “speculators” is stupid and nothing but harmful.  But there is a shift here and it is positive.

Overseas stock markets were higher and Wall Street index futures pointed to a solid open as the cost of oil retreated further and traders turned a bit more hopeful about the economy.

Light sweet crude oil for September delivery was down $2.17 at US$126.25 per barrel on the New York Mercantile Exchange, after dropping more than $3 in the previous session as Hurricane Dolly looked likely to avoid oil installations in the Gulf of Mexico.

Crude now is down by more than $20 a barrel from its July 11 peak above $147 – a surge that had raised worries that inflation would cripple the economy.

Furthermore, according to the Bureau of Land Management:

The Department of the Interior’s Bureau of Land Management today published proposed regulations to establish a commercial oil shale program that could result in the addition of up to 800 billion barrels of recoverable oil from lands in the western United States. …

In remarks last month calling on Congress to expand domestic energy production, President Bush noted the “extraordinary potential” of oil shale resources on public lands in the West. According to the U.S. Geological Survey, the U.S. holds more than half of the world’s oil shale resources.

The largest known deposits of oil shale are located in a 16,000-square mile area in the Green River formation in Colorado, Utah and Wyoming. Shale formations in that area hold the equivalent of up to 800 billion barrels of recoverable oil. Federal lands comprise 72 percent of the total surface of oil shale acreage in the Green River formation.

There are solutions available and hopefully the Republicans can continue to put pressure on Democrats to open up more opportunities.

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