IMHO the major impact on KAR is the economy. Crude oil, which is...

IMHO the major impact on KAR is the economy. Crude oil, which is used to make gasoline, is at a seven-month low of $92.81 a barrel. It’s down nearly 13 percent since May 1. Behind the steady drop are larger fuel stockpiles, easing fears about Iran and expectations of lower demand as the global economy slows.

Earlier this year, oil and gasoline prices were jumping from already high levels. Global demand was rising. And production outages were reducing supplies. Tensions between Iran and the West over Iran’s nuclear ambitions raised fears that output from the world’s third-biggest exporter would plunge.

The price of U.S. benchmark oil rose to about $110 a barrel from $96 in the first three weeks of February. The price for international oil, used to make most of the gasoline in the United States, spiked even higher: to $126 per barrel from $110 over roughly the same period
The price of oil continues to decline on the expectation that world markets will be flush with extra supplies this year.

Japan's Kyodo news agency reported that the U.S. will ask other countries to release spare oil reserves when the Group of Eight meets this Friday. The report follows rumors earlier this year that Western nations were planning a coordinated release of spare supplies. This is expected because this is an election year and this is a ploy implying the economy is ok in the USA.

Peter Donovan, a broker at Vantage Trading, said oil fell sharply in the afternoon as the Kyodo headline was passed around the New York Mercantile Exchange, where futures are traded.

Kyodo said President Obama will ask leaders of other G-8 countries — Britain, Canada, France, Germany, Italy, Japan, Russia — to make spare supplies available to refineries this summer. The release would be geared toward keep prices in check in July, when the European Union begins a ban on oil imports from Iran.

Oil prices have been falling on signs that demand is cooling while supplies are building. Major oil producers like Saudi Arabia delivered more supplies to the world market. Meanwhile, data from the U.S. and China suggest economic growth is moderating, while Europe is teetering on recession.

If the eurozone cannot solve its debt problems, it will weaken an economy that consumes 18 percent of the world's oil. It also could contribute to a global banking crisis that would hurt the U.S., China and other countries.

Russia's main stock index on Thursday hit its lowest point since Oct. 5 as oil prices keep falling, lowering revenue from the country's lucrative energy sector and as fears grow that Greece's political crisis will hurt the European economy.

The MICEX index fell 2.7 percent to 1,299 points by late afternoon in Moscow. The ruble was down 0.9 percent against the U.S. dollar at 31.2 rubles.

A resurgence of sovereign debt fears has accompanied Greece's failure to form a government and an apparent wider European shift in political rhetoric away from austerity. If Greece leaves the eurozone it's going to raise fears about contagion - you're going to have a deflationary trend and at the same time you're going to see more pressure from the dollar.

The Russian markets' drop has been more severe than other European emerging economies over the past two weeks because of the country's dependency on oil prices, which have fallen 12 percent this month. Oil prices, in turn, have fallen on fears Greece may leave the euro currency union, causing turmoil in European markets.

Analysts and investors are also concerned about Europe's ability to trim massive government debts. Voters in France and Greece recently ousted many top officials who supported spending cuts and other reforms. If the eurozone cannot solve its debt problems, it will weaken an economy that consumes 18 percent of the world's oil. It also could contribute to a global banking crisis that would hurt the U.S., China and other countries.

The expectation is that the oil turmoil may last 18 months and this would affect any oil or gas production company and their stocks.

Oil prices rise for one main reason... the prospects for a shortfall of supply which can be driven by an actual or perceived supply interruption and/or an imbalance caused by a surge or projected surge in oil demand. At the moment neither of these factors exists in the market. The result is a balanced or even oversupplied market. Demand for oil is growing very slowly as a result of a global economy that is going nowhere quick. Europe may not be in a recession based on the so called official definition but a major region of the world that has a growth rate of 0% is in recession in my definition. The other major developed world economy ....the US...is only doing marginally better growing at a rate of maybe 2% three years into a recovery.

No matter what happens in Europe or the US over the next six months to a year oil demand in this region of the world is not going to materially change all that much.


Bob