Oil prices really dropping?

How real is the recent drop in oil prices? According to an article “Nothing to smile about” in the Economist, there is nothing to cheer about the recent drop in the oil prices. The real rate of interest is negative due to lower nominal rate and higher inflation. There is no incentive for oil producers to pump more oil in this negative interest rate scenario. The money produced by pumping more oil is not going provide positive return. The oil producers are better off by letting the oil in the reserve and pumping it when prices are high enough. During the time when inflation is so high, the lower oil prices remain distant dream.

End of road for car leasing?

The trouble for Detroit's Big Three continues, the car makers are now trying to minimize losses by ending loss making lease business.

http://online.wsj.com/article/SB121737722208895269.html?mod=hpp_us_whats_news
WSJ article (Refer link above) mention reasons behind this step.

1. Banks are turning their backs on leasing as falling used-car prices make the business less profitable.
2. Declining resale values of trucks and SUVs that were leased two to three years ago, before gasoline prices shot to $4 a gallon. When leases expire, the auto makers' finance units must sell the vehicles and recoup some of their costs. But with today's fuel prices, used trucks and SUVs are selling for far less than the Big Three had anticipated. So they're losing money when they sell those vehicles.

Ford last week wrote down $2.1 billion in pretax profits as a result of unprofitable leases (a key factor in the company's $8.7 billion loss for the period). GM reported $2 billion loss (out of total of $15.5 billion for the latest quarter) due to declining residual value.

Auto Alternative
http://online.wsj.com/article/SB121737803358095319.html?mod=article-outset-box
The article above mention some good alternative to the lease option.

• Buy the car, Look for deals on domestic models, priced to move inventory.
• Lease from a foreign auto maker, such as Toyota or Honda.
• For those with spotless credit, get an independent bank to finance the lease.

Auto makers are looking to make alternatives as attractive as possible or in some cases they are planning to make buying more attractive than leasing (Ford aims to make vehicles like the F-Series trucks and Explorer SUVs "lease proof" by making terms on leases so tight that the monthly payments are too high to justify.).