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Cycling of the Oil Sector

With oil prices breaking their all time highs, investors and market analysis experts are analyzing the causes behind this phenomenon. They have discovered one helluva vicious cycle.

Rising oil prices pressures stocks, and falling stocks push investors into oil. Under normal circumstances that dynamic would spell a bubble, but unlike tech stocks, the market–through necessity–is much more willing to pay, leaving prices at unreasonable highs. That is until demand destruction sets in, but it’s difficult to see that really take hold in the short- or mid-term.

Also at blame for these record prices is the lack of a strong US dollar. Oil sold to foreign investors under the dollar is a lot cheaper, which drives up the demand for the already very limited resource.

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