Could $80 Oil Hit US Economy?

by William Davies
(UK)

With a collapse in global economic growth, crude oil (NYME_CL)prices have fallen dramatically from the heady heights of July 2008.

But now the crude oil market has alerted some observers with a positive signal which could mean higher crude prices ahead.

This is significant because, according to Adam Hewison of INO.com, it is the first time in around 18 months that a definite buy signal has been showing in the energy markets.

While an increase in crude oil prices from around the current $45 mark would be very welcome news to producers such as OPEC, the key question is how would such a move impact on a clearly weak US economy.

Saudi Arabia has said on more than one occasion that it would like to see oil at or above $70, as the current low prices are hitting the Gulf states revenues quite hard.

In fact pretty much the whole world economy is at present struggling to show any positive change in growth, with some of the emerging markets like China still posting positive, though single digit GDP growth.

So if crude oil is moving higher, how much of the increase in prices could the US economy cope with in its current state? Find out below:

America is still heavily dependent on this basic commodity and yet it has limited control over its production and distribution.

Given that the major reserves of oil are in potentially volatile regions, the issue of energy security is a very serious one and makes the US vulnerable.

Just a small hiatus in the supply chain, even for a short time period, could lead to a major development in crude oil market dynamics, and oil could quite easily surge back to the $70 to $80 per barrel range in a moment.

Take a look at the video below where Adam looks at the possible target zones for crude oil prices over the next 12 months or so.

Enjoy.

William Davies.

http://crudeoilbounce.commoditycrunch.com