President Obama declared that there is no silver bullet for rising gasoline prices. What he can do of course is waste tax payer's money, slander and investigate speculators that have carried the risk of the global economy on their backs while keeping the markets functioning.
Why are oil speculators being singled out when every commodity on the globe (except for our abundantly supplied natural gas market) is exploding? If energy speculators are to blame for running up prices, then why then are they leaving natural gas alone? Perhaps it is because we have plenty of supply and it is a domestically traded market that is less susceptible to the value of the dollar overseas.
Yet the president does have a magic bullet to bring down prices. It is called the budget. If President Obama can get spending under control, then the value of the dollar would increase and the price of oil would fall. Just look at what happened to the price of oil and the value of the dollar when Standards & Poor's lowered the outlook on U.S. debt. The day of the downgrade on the U.S. outlook on April 18, 2011, the June dollar index hit a high of approximately 76.05 before it retreated ignominiously to a low of around 73.93 on April 22, 2011. The price of oil hit a low of approximately 106.54 on the day of the downgrade and now has surged to as high as the 113.07 area overnight.
Deficits do matter and they cost all of us. The other silver bullet for gas prices remain with the Federal Reserve. The Federal Reserve with QE2 has dramatically increased the price of oil. In August of 2010 oil was as low as approximately 70.76 and now, as the QE2 comes to a close, we see oil hitting about $113.00 a barrel. QE2 drove investment and demand in the emerging markets. The price of Brent crude in august of 2010 was as low as approximately 74.64 and now has soared trading as high as around s$127 plus. In his historic Fed press conference this week, Ben Bernanke will have to explain why this has happened. My bet is that he won't have a good answer.
To be honest, I am very frustrated with many oil analysts who blame speculators for the increase in price of oil. They seem oblivious to the historic shifts in the economy that is causing prices to fly. They have this insane belief that if somehow we limited speculating in oil, that somehow the price would be magically lower. That is ridiculous and naïve. Just look at the world around you. Acknowledge what is happening in all commodities, even ones that are not traded on exchanges.
The fundamentals are about as bullish as it gets. We are being driven by geopolitics, deficits, wars, and the growing lack of confidence in the currency that the commodities are traded in. Analysts who should know better are feeding into this mob like hysteria and before you know it, the next thing they will try to do is confiscate commodity trader's profits as opposed to just wasting our money on a publicity grabbing, self servicing investigation.
I'm calling the critics of speculation out! I want reasons why you believe that speculators are the driving force behind higher prices rather than reflecting the fundamentals.
The Yemen leader agrees to step down. Yes, in the meantime, more political uncertainties continue to rise over the weekend and the President of Yemen promised to step down in a few weeks as long as he could get political asylum. Yet the protests go on. Yemen has been an ally to the U.S. in the war on terror and there is a concern of course that Al Qaeda will try to take control. In Libya the war rages on. In Syria a violent crackdown continues. All commodities are rallying and not just oil.
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.