Are Americans losing influence in the oil prices arena?
President Bush has been asking the Saudis to increase oil production and urge OPEC to do the same. He points out that with the U.S. economy leaning toward recession (some of us think it's already here), demand is likely to drop if oil prices remain high. But, as the Wall Street Journal Online reports, American oil demand is no longer very tied to oil prices:
A big problem facing U.S. and other rich-nation consumers — already hit by other financial pressures — is that their oil use has grown increasingly disconnected to oil prices. Even if they're conserving, benchmark U.S. and U.K. crude prices — the basis for all other oil-related prices globally — are being influenced more by consumption elsewhere in the world.
In the developing nations China especially comes to mind as a country that is driving oil prices more directly now. That's not to say the American economy is totally powerless against oil prices. Oil prices here are dropping this morning, heading toward $90 a barrel. But lower oil prices would do more than ease Americans' fears for their wallets. It could possibly help increase profit margins for Big Oil companies like Exxon (XOM) and Chevron (CVX) that also produce gasoline. Especially if gasoline prices move as much as they have in the past few days — which is not much.
Disclosure: I do not invest in Big Oil companies.