Oil Prices Could Stifle Recovery
The economic recovery remains young, as its only been a few months where the GDP has settled in positive territory. But as the rest of the world livens up, and trade begins again, higher oil prices could be the rain to our economic parade.
Why Oil Matters
Each year the United States imports some 5 billion barrels of oil from foreign producers. This is the single largest national expense, as an $80 barrel of oil drains some $400 billion per year in cash from the American economy. January 2010 balance of trade was at a -$37 billion…most of which, roughly $30 billion was made up of energy.
Energy is Killing the US
Energy prices exasperated the collapse in 2008 as record high oil prices were draining cash from the US economy at an annualized rate of $750 billion at the top. These kind of energy prices are sure to absolutely demolish the American economy.
Do Some Math
At an average price of $80 per barrel, the US economy will lose $400 billion per year to energy prices. In just two years, the stimulus package money will have been removed. It will take just a few years after that for the bailout cash to be removed. And just a few more years until the Fed’s quantitative easing is removed from the system. But it won’t have disappeared. No, it will be in the hands of foreign oil producers.
Beat it, At Least Personally!
Well, if you can’t beat them, join them! There are a variety of oil and natural gas companies that pay well, extremely well, and operate in other counties, providing exposure against the US dollar. One of those companies is Enerplus Resources Fund (ERF) which pays a 9% annual dividend paid monthly. Can you smell the compounded earnings?
