I saw a blog that compared gold prices with oil prices. It was a Ron Paul related blog and so I did not dive too deeply in, but it did have one graph that showed the price of gold as compared to the price of oil. They were in lock step.
It is not that oil prices are moving up.
It is that the dollar is moving down.
If we were Einstein, we would not be able to tell which one was moving since it is all relative. But we have other currencies and other commodities to compare oil with.
I am not much of an economist, but I do know that as the dollar weakens it causes goods from other countries to cost more in dollars. And goods and services made in the USA become cheaper for other countries to buy.
I am not going to go into why this is happening, but I will go into what it means for energy usage. Since the USA uses a lot of oil from other countries, our price of oil is going to go up. It is going to be cheaper to conserve than to waste. The payback on any kind of energy savings will be shortened, will happen more quickly.
Expect utility companies to work very hard to not use their oil-powered auxiliary power plants during peak energy times if they can prevent themselves from doing it. During peak times, utility companies have to turn on their least efficient electrical generators, and with the price of oil so high, it will cut into their profits.
Expect ad campaigns asking residential and commercial customers to reduce middle of the day uses of electricity. Expect some kind of bonus for reduced peak usage. Expect requests for peak price increases.
The other side is that as our dollar weakens, and American-made goods look more attractive overseas and in our own country, manufacturing may increase thus causing us to use more energy. It starts getting confusing because each step in an economic cycle causes the next cycle. But we are going to have use our energy resources more wisely for us to get out of higher oil prices and a lower dollar. It is American productivity gains that keep us as successful as we have been. It is time to not just work harder and smarter, but also with less, and with more economy. We have to use every resource to its fullest and have no waste to be fully efficient and get out of this economic cycle.
