Strong demand for oil is driving prices steadily higher. And if you think it’s bad here in the U.S., imagine living in Europe.
Brent crude (which is the European crude oil benchmark) is trading for more than $80 per barrel. That’s about $8.00 per barrel higher than the price for oil here in the U.S.
The growing global economy is creating plenty of demand for oil. And of course, when demand is high, prices naturally rise.
Last time oil climbed above $100 per barrel, it was tough for businesses and individuals.
Higher oil prices lead to higher energy costs for businesses. So running factories, paying for delivery vehicles, even keeping the lights and air conditioning on was more expensive when oil rose last time around.
You probably remember the sticker shock the first time you had to fill up your car with gasoline that cost $4.00 or more per gallon. That was a burden that cut into family budgets and even made it difficult for some people to make ends meet.
But in 2018 things are a lot different.
For one, businesses have much more efficient equipment. Thanks to tech advancements (made necessary by the last round of $100 oil), companies are able to get more done with less energy. And that means $100 oil won’t cause nearly as much financial pain for businesses.
At the same time, U.S. autos are much more efficient. So while higher gasoline prices certainly aren’t welcome, they’re not crippling for family budgets.
It also helps that jobs are plentiful, wages are rising, and the overall economy is very strong.
So today, higher oil prices aren’t nearly the challenge that they would have been several years ago. And even with oil edging closer to $100 every day, I don’t expect the stock market to back off as a result of higher energy costs.
The Economy Is Still Strong — So Don’t Expect Oil to Back Off
…The key factor driving oil prices higher is the strong U.S. economy. We’re seeing more demand every day for oil — which is the only reason oil could be consistently trading higher despite record U.S. production.
Full article: What Happens When Oil Hits $100? (Daily Reckoning)