Contrary to media assertions, the recession continues and that is starting to weigh on the price of oil as it dropped to a six-week low on Friday, and will plunge again after the Labor Day weekend.
The problem is the so-called stimulus money is gone, which had masked the real condition of the economy, and that is causing the jobless claims numbers to rise to levels which reflect that, along with the falling manufacturing numbers, as represented by the release of the general economic index by the Federal Reserve Bank of Philadelphia, which showed a plunge of 7.7 percent this month.
Again, while seeming to be a contraction, things are just returning to what they've in reality been since the recession began as the stimulus money effects leave the economy.
The government and Federal Reserve were hoping to buy time through spending the hundreds of billions so the private sector could rebound and take their place as creators of jobs and economic growth.
But the stimulus produced a false signal which had CEOs even hailing the economic turnaround, when they were in fact the beneficiaries of taxpayer dollars, rather than demand from the marketplace.
No matter how you look at it though, we're in for a rough ride economically, as there's nothing out there to indicate we're even close to beginning a recovery, and in fact the failure of government interference is being revealed publicly to all, yet the Federal Reserve has give us their assurance they're ready to do and spend what it takes to shore up the recessionary economy again, which will cause even more devastation over the long term.
Crude oil prices and inventory are predictably responding, as the oil inventory of the U.S. surged to its highest level since 1990, according to an Energy Department report.
That means consumers are staying close to home and continuing to cut back on spending.
When taking into account the fundamentals, crude oil prices are still considered too high, and the possibility of increased demand is falling by the wayside. Nothing indicates that will change anytime soon.
In other ominous and understated economic news, Axel Weber, a council member of the European Central Bank, said the European economy may need intervention from the central bank through the end of 2010. That's not surprising, as there was no way the sovereign debt crisis, which has largely been ignored by the media after it was allegedly taken care of, has been resolved, as the sheer size of the problem couldn't be taken care of with a few debt offerings, no matter what the size of them were.
While the austerity measures taken by some nations were a good move, it staggers the mind to think they could go back to throwing money out into the economy of the region through central banks, making the problem even worse than it is.
With oil prices looking to the economy to signal where things are at, the answer is it's in bad shape, with no prospects it's going to turn around in the near future.
That means consumption, at least in the U.S., the world's largest oil consumer, will continue to fall, and oil prices should follow that lead.
In the peak July traveling season, joblessness and higher gas prices held consumption down, keeping demand relatively unchanged at a time it should have been soaring. Gasoline deliveries even fell slightly from last year, averaging 9.257 million barrels in July 2010, in comparison to 9.26 million in July 2009.
Stockpiles in the U.S. rose to 1.13 billion for the week ending August 13, gaining 5.3 million.
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