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IBDvalueinvestin (99.68)

Oil going up indicative of U.S. GDP growing

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June 16, 2009 – Comments (4)

Oil going up will show that U.S. GDP is growing      9-Jun-09 06:38 pm     The U.S. GDP is about $12 Trillion per year. The U.S. uses oil to make products and uses oil for transportation. The U.S. uses 20 million barrels per day. Oil was at $120/bbl last year at this time, so the US consumer was using oil at a rate of $864 billion/yr. In May 2009, oil was at $60/bbl, so the US consumer is using oil at a rate of $432 billion/yr. True, the US consumer is spending less because the oil needed for products and transporation is $432 billion/yr less. This is 4% of the GDP. The fact that consumer spending is not down by 4.0%, but is down by only 0.7% from the prior year shows that the reduction in GDP is dominated by energy costs. That is why people are saving much more in 2009. The reduction in the GDP is a great thing because it is caused by reduced energy costs. Everything is selling at cheap prices. People are getting all the products they need and more in 2009 and they are doing it without needing any new credit. If oil costs remain around $70/bbl, we are going to truly see that demand is growing and that GDP is not shrinking at all. $9 Trillion in cash is sitting on the sidelines. These are the best of times... most people will catch on soon.

 

Excellent post by

Randy  @ Cupertino, California

4 Comments – Post Your Own

#1) On June 16, 2009 at 11:05 PM, russiangambit (29.26) wrote:

Are you saying that because consumers are forced to spend more on gas, and consumer spending is a component of GDP, it is good for GDP?  Intresting. What happens after the said GDP is adjusted for inflation? 

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#2) On June 16, 2009 at 11:08 PM, russiangambit (29.26) wrote:

Oh, I forgot, we are going to use government calculated CPI to adjust for inflation. Never mind.

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#3) On June 17, 2009 at 8:42 AM, IBDvalueinvestin (99.68) wrote:

There is no inflation  friends. Those betting rates are going higher anytime soon are now getting their heads handed to them. Look at how fast the 10yr treasury yields have fallen from 4%

ECONX May Core CPI Y/Y +1.8% vs +1.8% consensus; prior +1.9%


08:30  ECONX May CPI Y/Y -1.3% vs -0.9% consensus, prior -0.7%
08:30  ECONX May Core CPI M/M +0.1% vs +0.1% consensus, prior +0.3%
08:30  ECONX May CPI M/M +0.1% vs +0.3% consensus, prior 0.0% Report this comment
#4) On June 17, 2009 at 9:09 AM, farmnut1985 (25.06) wrote:

The reason inflation is currently non existent is partially because the consumer has reduced spending and is holding their money.  Inflation is ahead of us, the fed put way to much money into circulation.

Oil has increased maybe some due to GDP but most of it comes from OPEC deciding they want oil at around $75.00 a barrell as they have steadily decreased current inventories over the last couple of months. link .  I was trying to find a chart on crude oil consumption and production rather than price because the price is not a direct representation of the actual volume of oil moved as it is easily manipulated.

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