Tuesday, April 25, 2006

I’m Going To Pump You Up

President Bush says he is trying to ease gas prices. He says the US will probe price gouging and halt deposits to the reserve. Neither one will work.
There is one common denominator in all of this. Watch the “Oil Futures”; are they up or down? A savvy investor wants to know what happened to drive the future prices in any particular direction. If the future supply of a commodity like oil is seen to come up short then the price goes up.
The market is nervous and has been for three years. One reason is the rising worldwide demand for oil. The other reason is fear that short supplies will create higher prices and higher prices will trigger inflation. Fear is a major component of the rising oil prices; what causes the fear? Nigeria’s civil unrest is targeted at the Oil Companies resulting in a shortage of oil. Iraq is pumping less oil today by 50% than before the US invaded. Our foreign policy towards the democratically elected government of Venezuela causes the market to worry about future supplies to the US. The US Government’s attitude is remarkably similar to Iran as it was prior to the invasion of Iraq. Oil Traders and Investors are worried. Sounds a lot like a failed foreign policy has sent a shiver through the markets, which are clearly worried that future oil supplies are in jeopardy. The net result is you pay more at the pump today.


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