Many people don’t consider the relationship between a rate cut that some say is needed to help a troubled mortgage market, and the price of oil. A rate cut stimulates the economy, thus people have more demand for oil, i.e., gasoline. “What’s been weighing down on the crude oil futures market is concern about the U.S. economy,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “If the expected cut indeed holds true or is actually larger, it will bolster the U.S. economic outlook, and that’s supportive of oil pricing.”
Others say oil futures and subprime issues are fueled by speculators and agitators, with no link to reality. When oil reached $100 per barrel gasoline prices actually dropped to around $2.79 a gallon. Another opinion to consider is whether the Bush adminstration artificially fueled economic growth in recent years, favoring an out-of-control oil industry. Subprime issues suggest any artificially manufactured growth was unsupervised and unregulated, thus another rate cut recommended.
The Federal Reserve is widely expected to lower its key rate, now at 4.5 percent, by a quarter of a percentage point – or perhaps more – to try to keep troubles in the housing and credit markets from sinking the economy.
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