aspen4ever

Gaza War: Expect a Spike in Oil, Gold

The definition of a "spike" is "a sharp rise followed by a sharp decline." So I agree that the perceived instability in Israel will cause an immediate (this next week) "spike" in oil prices. BUT the prices will fall down below $40 almost as quickly. The demand just isn't there (YET!)

Basic economics teaches that price is derived by the interaction of supply and demand. Right now, supply outweighs demand. The WSJ's cover story this weekend "Manufacturing Tumbles Globally" reports that manufacturing indexes for every single nation across the board fell to their lowest levels on record. This is a bit of an exaggeration but you get the point. It will be several more months before the stimulus plans stimulate demand and before the OPEC production cuts affect supply.

IMO the Israeli/Palestinian saga won't escalate to directly involve Hesbola, Iran, or any of the other Arabian nations.

Gradually, the price of oil will rise again to a level that will be sustained. I expect to average $65 bbl in 2009.

Also, the Bush administration is replenishing the SPR with 12M bbls to be at its max capacity (727M bbls) before leaving. Way to go Georgie Boy! Thanks for nothing!