Oil responds as Fed signals for exit

For the critics of speculation, one must remember that the Fed made it very clear that by this policy they wanted to create inflation. The Fed feared a deflationary depression and instead decided to flood the failing US and world banking system will a flood of freshly printed bills that had a direct impact on the value of the dollar and by default the prices of almost all commodities. Now the question becomes whether or not the Fed is changing their policy because they believe that the economy is really getting better or because the events in the North Africa and the turmoil throughout the Arab world is driving inflation beyond their comfort zone.

Fed Chairman Ben Bernanke and members of the Federal Reserve have to ask themselves whether it was their policies of sparking inflation that lit the fuse of discontent across the Arab world. Was it the surging food and energy prices that finally awoke the masses to the fact that their leaders were living high on the hog while they are being repressed? Not only did they lack freedom, but they now face soaring food and energy prices and struggled to put food on their tables.

Another reason the investment funds and pension funds flooded to the commodity markets is because that's where the Federal Reserve wanted them. By creating an environment with negative real interest rates they were daring if not begging the funds to flood into the oil, gold and silver markets to ward off deflation. How dare anyone blame the speculator for doing what the Fed wanted them to do to save the global economic system? If you believe that the Fed saved the economy from an even worse fate, then you have to thank the speculators in the futures markets that made it all possible.

In fact, the Fed is on its knees thanking the speculators for bailing the world out of the greatest economic crisis since the great depression. Without the speculators, unemployment might be dramatically higher than it is now. More banks would have failed and the global economy would have frozen leading to even greater problems than we have now.

Over the weekend it seemed rebel forces in Libya were making some progress and were even promising to start delivering oil. As Obama finally gets around to addressing the nation regarding Libya, Reuters News reports that, "Rebels in east Libya have seized the town of Nawfaliyah from forces loyal to Muammar Gaddafi, extending their advance westwards towards the Libyan leader's hometown of Sirte."

In Syria violence continues and as reported by Reuters, "Two Reuters television journalists have been missing in Syria since Saturday night, when they were due to return to Lebanon."

Another Earth Quake in Japan overnight hitting 6.5 on the Richter scale caused a small tsunami warning.

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 pflynn@pfgbest.com.

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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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