While oil prices have pulled back slightly from their recent highs, Bloomberg is reporting that a lot of experts are predicting higher oil prices in 2011 – with some going as high as $100 a barrel in their predictions. Ignored in all this is the role played by Federal Reserve money printing. The whole story is about how, allegedly, people are expecting robust economic recovery and are thus betting on increased oil usage. But the kicker to this story is that embedded in it is the proof showing that it isn’t demand causing prices to rise:
…Production will increase this year while stockpiles are already at a surplus, Evans said. Oil output will rise 0.9 percent this year, according to the Energy Department. U.S. inventories were 339.4 million barrels as of Dec. 24, 7.6 percent above the five-year seasonal norm, the department said on Dec. 30…
What can we draw out of this? First, that demand is not significantly increasing – in other words, if there is an economic recovery, it isn’t causing people to use more oil. That would be a strange economic recovery, if you ask me. Secondly, that oil traders, unless they are complete idiots, aren’t expecting tight supplies to ramp up prices – they are, therefor, expecting the further deterioration of the dollar to press oil prices higher.
Rising prices for basic necessities threatens the entire economy. But there is no way to avoid such rises – there are simply too many fake dollars out there. Bernanke has printed us in to economic ruin. The only thing remaining is for us to pay the piper for it.
On January 4th, I paid $3.09 for a gallon of gas – on January 5th, I paid $3.13.
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