Of one kind or the other! The UN finally decided to intervene just as it seemed that Gadhafi was on the verge of crushing the rebellion! The G-7 also intervened in an effort to try to break the runaway Japanese yen as the country continues to battle a nuclear nightmare. Now China intervenes against soaring food and energy costs as it raises bank reserve requirements.
Oil prices shot up as the UN finally showed some backbone as it voted to establish a "No-Fly Zone" before the Mad Dog of Libya could slaughter his opposition. Weeks ago it appeared Gahdafi was on the ropes when he was hunkered down in his last stronghold in Libya. The terrorist then turned the tide as the world sat on its hand and only decided to act before it was too late. Hopefully it is not. Of course war in Libya increases the risks for oil, a risk partly priced but partly not.
The real risk may be if Libya follows through on some of the threats of Libya's Defense Minister who said as reported by Reuter's, "Any foreign act against Libya will endanger air and maritime traffic in the Mediterranean. Libya will hit civilian and military targets in response to any foreign attack and that it will expose the Mediterranean Basin to short and long term risk."
So what he is saying is that Libya is now an official terror state. Now it is out in the open. They will kill civilians (like they have done before) and now that is policy. We have to take the threat seriously because of Libya's cowardly track record. This murderous regime that targets commercial airlines must be taken seriously. Expect a scorched earth policy as Gadhafi and his regime go.
So perhaps the critics of speculation are finally starting to get it. The risk to supply is high as the market was signaling all along. Instead of whining about what the market is telling us and blaming speculators or the boogey man perhaps it is time you listened to what the market is saying!
Crashing in on the carry trade! The Bank of Japan, backed by leaders of the world's largest economies, sold the yen in an attempt to stop the buying frenzy in anticipation of massive yen repatriation. Global central banks are trying to quell irrational yen exuberance before it creates a bubble that could bring the global economy down with it.
As reported by Bloomberg, "China raised banks' reserve requirements for the third time this year after inflation and industrial output exceeded economists' forecasts in February. The proportion of lenders' deposits parked with the central bank will increase half a percentage point from March 25, the People's Bank of China said on its website today. Premier Wen Jiabao has set taming inflation as the nation's top economic priority this year, citing "exorbitant" house-price increases and risks to social stability. Today's move was even as Japan's earthquake, tsunami and nuclear crisis cloud the outlook for the Asian and global economies. ‘Inflation risk is very high as oil prices and food costs are rising, and wages have increased substantially,’ Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. said before the announcement.
“Before today's move, reserve ratios stood at 19.5 percent for the nation's biggest banks. The central bank has also said that it may impose extra requirements on individual lenders as part of efforts to rein in liquidity in the fastest-growing major economy. People's Bank of China Governor Zhou Xiaochuan said this month that interest rates will be used to curb inflation, and played down the role of currency gains, which U.S. officials have encouraged China to use. The central bank has boosted borrowing costs and deposit rates three times since mid- October."
Upside risks abound. The China news may temper bullish enthusiasm and we may reverse if Japan has a nuclear set back.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.