OIL PRICE DROPS $3; GERMANS PAYING $8.00 PER GALLON FOR GAS

Crude oil prices dropped about $3.00 per barrel yesterday as the U.S. dollar strengthened a bit and traders waited to see what the Federal Reserve will do with interest rates at their meeting later today. Most analysts believe that a quarter-point rate cut is already factored into the oil price and that if the Federal Reserve makes no cut, oil could decline further as the U.S. dollar strengthens.

Think $3.79 per gallon for gasoline is high? Germans are paying the equivalent of roughly $8.60 per gallon for gas now.

From MSNBC:

It is an everyday lottery when it comes to fuel prices at German gas stations. Prices for regular unleaded and diesel gas bounces up and down, often changing twice on the same day. And drivers in this car-loving nation are unhappily dealing with increasing prices at the pump.

Record prices on the international oil markets have driven gas prices across Europe sky high, with a gallon of unleaded gas costing about $8.60 per gallon in Germany. (In Germany, gas is sold by the liter with one liter of unleaded fuel selling for an average of $2.29)

The high prices hit people where it counts – in the wallet.

WEAK DOLLAR VERSUS EURO CAUSES DECLINE IN GERMAN CAR SALES

Remember, a weak dollar causes imported foreign goods to be more expensive for those using the dollar to make purchases, while U.S.-made goods exported to other countries, in this case Germany, a user of the Euro, are less expensive to those using the Euro.

From The New York Times:

This year, the dollar was down about 6 percent against the euro, which damaged German car sales in this country. Its auto trade surplus with the United States fell 30 percent.

The declining American trade deficit for the auto industry does not mean that this country is anywhere close to reaching a balance in the sector. During the second quarter, the United States imported $1.90 in automobiles and parts for every dollar of such goods it exported. That is the lowest ratio since 1998 and is down from $2.27 in the 2006 period. It is way below the record ratio of $4.22, reached in 1989.

But it still means that it would take a 31 percent increase in American auto exports, and a similar decrease in imports, to produce a balance in auto trade. That would require a much lower dollar — and a much weaker American economy.