We are back to 2006/7 gas prices and for what, exactly? It’s not demand. That has fallen by roughly 2 Million barrels a day. It’s not Geopolitical. While tension between Iran and Israel continues, what we are seeing is nothing new. We are now seeing two factors:
1) Oil producing countries need the money to fund government operations, therefore cut production to raise cost. (spoke about that here)
2) Now investors are looking at the economic conditions, see that inflation is coming and are turning to commodities as a way of protecting themselves, as well as hoping that the worst for the economy being over
Oil prices soared above $71 a barrel Wednesday to reach a 2009 high, as investors poured money into crude markets to protect themselves against the inflation risks posed by a weakening U.S. dollar.
Oil, which typically trades inversely to the dollar, has more than doubled in price in three months as traders also cheered news showing the worst of a severe U.S. recession is likely over. They brushed off data — such as a 9.4 percent U.S. unemployment rate in May — that suggest crude demand will remain weak. Even growing inventories have not checked crude’s stellar rise.
The bottom line here: this is Bull! If there was ever a time that the consumer should pay attention to the price of oil it would be now as our current situation shows how vulnerable we are to just about anything. There is no realistic reason oil should be this high. This is purely a profit drive by producers and investors.
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