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What President Obama’s Move Toward Diplomacy in Syria Means for Crude Prices

What President Obama’s Move Toward Diplomacy in Syria Means for Crude Prices

It could be argued that the price of oil is the world's best barometer for global harmony. And right now, thanks to the President's tack towards to diplomacy, that barometer is falling. In the past week, crude prices have shed about five bucks a barrel, going from a brief burst above $112 to around $107 today.

Related: Crude Oil Is Going Higher No Matter What Happens in Syria: Dicker

If this cheaper energy trend continues at its present pace it would undoubtedly give a nice lift to our otherwise sluggish, headwind-facing economy. But as my co-host Jeff Macke and I discuss in the attached video, unfortunately that's not happening. At least not anytime soon.

For starters, the current diversion towards diplomacy, while promising, is unlikely to be anything more than a delay in an already drawn-out ordeal. Even if the proposed curbside clean-up for chemical weapons goes through, the strife on the ground and in the streets of Syria is not going to dwindle. In short, even if this crisis dies down, another regional conflict will soon take its place.

Related: Wall Street Decides Syria No Longer Matters

At the same time, there are economic realities that now buffer and diffuse what used to produce a nice relief rally whenever oil prices fell. First of all, there's simple supply and demand. Thanks to reduced domestic consumption, U.S. oil and gas usage is at a ten year low. At the same time, high prices have pushed U.S. household energy expenditures to a 30-year high (excluding that brief moment in 2008 when oil soared to $140 a barrel). Add in the fact that there is almost no wage or income growth right now to offset rising fuel and energy costs, and the pricey-petro problem looks set to stay put no matter how many Priuses we buy.

Finally, there's also the reality that crude prices are still relatively high, having stayed above the psychologically key $100 level all year long, as well as well as the fact that oil is still at least $10/barrel above its long term average of about $95.

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