Rising oil and food prices only “transitory”

It is only a passing thing.

Forget all about those rising commodity prices because they are only a passing fancy. If Federal Reserve Chairman Ben Bernanke isn't worried about inflation, then why should we be? Except for the fact that you have to feed your family and drive to work as all the while our potato chip bags and candy bars are getting smaller!

Maybe the Fed is using Fed policy to fight childhood obesity? Well, why not? He seems to want to use Fed policy to do just about everything else – price stability, full employment and even sending a message to the Chinese that if they continue to control their currency, then the Fed can inflate their bubble – to name just a few.

Yet more than anything, Mr. Bernanke gave commodity bulls another green light to keep buying as he spoke at the Federal Reserve Bank of Atlanta 2011 Financial Markets Conference in Stone Mountain, Georgia. The Fed is begging you to buy. The Fed, not speculators, has led global commodity prices higher. The Fed chief has encouraged commodity funds and passive investors to embrace the yields that are only seemingly found in the global commodity markets and while he says that inflation needs to be watched "extremely closely," generally his nonchalant attitude says the party continues.

He still believes that the impact on oil and food prices are transitory and generally driven by supply and demand. Which is true; that demand of course has been greatly enhanced with easy money policies. Still, while other Fed officials are thinking the Fed is falling behind the curve, Mr. Bernanke still believes there remains a significant downside risk to the economy, allowing him to keep his foot on the accelerator as oil and food price seem to be driving us around a major curve.

While Mr. Bernanke believes oil is about supply and demand, Dow Jones reports that the U.K. and Saudi energy ministers are to meet today and call on markets to recognize that high oil prices don't reflect supply and demand realities. Who's reality? Their reality! I don't want to be lectured by an illegal cabal that conspires to control the global price of oil.

Dow Jones also says that, "The International Energy Agency earlier this year called on the Organization of Petroleum Exporting Countries (OPEC) to increase output in order to tackle what it saw as a risk of oil shortages." It appears the International Energy Agency has another outlook.

In Libya, as reported by the Financial Times, Libyan rebels are ready to sell their first tanker of oil. The FT says that a 1.0 m barrel tanker is expected to dock near Tubruq to seek funding to sustain its uprising against Gaddafi. This comes a day after unconfirmed reports from AFP that Gaddafi is targeting oil fields in the south to thwart the rebels attempt to get into the oil business.

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.

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.

 

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