realist42

Oil Swings Go Beyond Fundamentals

Everyone should ask one simple question, "Who benefits most from these absurd prices?" The answer is not the oil producers, they are being criminalized each day in the media. Commodities markets are the winners at this point in time. If Goldman claims $200 barrels are comming soon they get lots of commissions on trades and make their biggest clients a little more rich. And who could blame them? This is how they make their money.

Simultaneously Bernanke and the Fed seem not to fully appreciate the impact of keeping interest rates artificially low. 15 percent of the increase in oil prices can be tied directly to the weakening of the dollar relative to the Euro in the last year. So that $138 barrel would cost only $120 if the dollar were stronger and that doesn't even take into account the speculators that are trying to protect themselves against the weak dollar by buying oil.

Finally, lets not forget that the Riyal is tied to the Dollar, the weak dollar has made it more expensive to live in Saudi Arabia, not giving them any incentive to increase oil production and risk further weakening the Dollar.