Colgan Capital is very excited to announce that we have recruited a wonderful person to take over as our Administrative Assistant. Ann Iten, formally at Chase Bank Trust department, will officially start July 7th. I assure you that you will feel very comfortable and confident with Ann. Our portfolio manager, Susan (Susie) Schneider, has also proven to be a great addition to the team. She has built many internal protocols to enhance our money management solutions and developed strong relationships with everyone she has worked with.
There are also many good happenings at Plan Your Legacy. Our legacy planning solutions are successfully being used in Canada and U.S. We were also recently cited in U.S. News and World Report - touching over two million households! Be sure to ask us for details on how to Plan Your Legacy today!
Why are Oil and Gas Prices so High?
When will they come down? What’s keeping them up?
What is going on? Before 2002, oil prices usually hovered around $20 a barrel. By early 2006, they were above $60 a barrel.1 They were at $62 a barrel in May 2007.2 One year later, oil prices have doubled. In October 2004, a gallon of regular unleaded gas averaged just under $2.00.3 Now it costs you twice that.
Is this just a supply-and-demand story? Has demand for oil and gas doubled in the last four years? Have worldwide supplies shrunk notably over the same period? It’s a bit more complex than that. Let’s look at some of the factors analysts cite for the soaring prices.
The commodities market. We’ve seen a historic bull market in commodities recently, with oil, soybean, wheat, gold, and silver prices at record inflation-adjusted highs. It isn’t cooling down just yet. All the speculators investing in the commodities market have helped to drive prices higher.
The weak dollar. What fueled the commodities bull market? Many economists point to the dollar, which has declined about 35% in value against other benchmark currencies since February 2002.4 When the dollar weakens, investors tend to buy commodities like oil futures as a hedge against inflation. Also, when the dollar loses value against other currencies like the euro and the pound, it makes oil cheaper for overseas investors.
The Federal Reserve has signaled that it is through cutting interest rates for the near future, and many people think that this will boost the dollar’s value against other major currencies. (The dollar tends to slide when the Fed cuts the key interest rate.) So that may encourage a drop in oil prices, and in retail gas prices.
Sustained demand. If somebody told you to cut back on your driving, would you do it? Could you? Many Americans can’t. We complain about higher and higher gasoline prices, but we ultimately sigh and put up with them. In addition to ongoing American consumer demand for gasoline, industries worldwide demand crude oil. As the economies of China, India and other new major-league economic players have developed, their needs for oil and gas have correspondingly increased, raising demand a bit.
What will make prices fall? As mentioned, some analysts believea recovering dollar will be the big factor. Others point to reduced worldwide demand for oil as an effect of record prices. OPEC has revised its demand forecasts downward twice in the last three months.5
Industrial needs aside, the American driver might be a major factor here. Change is occurring; SUV and truck sales are declining; people are adjusting their driving habits, and driving less. The U.S. is a prime market for oil exporters, and if consumer demand for gasoline lessens, oil prices seemingly have to fall. So your consumer sacrifice might send a message to Big Oil.
How is your money? When you see headlines about the economy, it may make you think of your financial situation, and what you might be able to do to improve it. In times like these, it’s a good idea to stay calm and remember that this is yet one more cycle with recovery on the horizon.
These are the views of Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
Personal Update
Just like oils prices, my children are growing each day. Christopher will be three in August and Emily is now 18 months old. Christopher is in the stage that every parent adores - all hugs and smiles. Emily is wonderful too and is beginning to express herself through a handful of words and giggles. Kathy continues to work part-time as a forensic interviewer and overtime as a homemaker! As for me - well, outside of work and family I have begun competitive mountain bike racing. It is a great sport!
