The three things that do the most to push up oil are weakness in the dollar, the dynamics of supply and demand, and natural disasters or manmade disturbances in the pumping of crude. Add to that, if OPEC is right, rampant and wide-spread speculation by traders.
The supply of crude out of the UK has been, for the time being, interrupted by a strike. According to Reuters, the strike over pensions began at a Grangemouth refinery in Scotland, operated by BP (NYSE: BP).
The strike raises the issue of whether Western governments should allow workers in oil fields and on pipelines to strike at all. The availability of oil and the huge jump in price to $120 makes a strong case for calling it a "strategic asset." The term has been applied to crude for many years, but it did not mean much when prices were lower and there was, at least from the standpoint of perception, ample supply.
The government of the U.S. needs to intervene and send the strikers back to work, or replace them, if necessary. Oil at $120 has as much chance of wreaking the economy as the credit crisis. The U.S., Europe, and Japan can only handle the pressure of so much commodity inflation. At some point, fighting inflation will become more important than cutting interest rates. Then, even Solomon will not be able to decide what to do.
Douglas A. McIntyre is an editor at 247wallst.com.
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
Reader Comments (Page 1 of 1)
4-27-2008 @ 5:49PM
william lindblad said...
Mac: Suggested reading: The history of labor day. While you are it it - check out the economic conditions. If yo are not up on this one you are apt to be in for a surprise. The year is 1893. Please do not tell me that there are no parallels. Ever hear of the McKinley Trade & Tariff? The wheels for that legislation were set in motion in June 1881 in a speech by Congressman Brewer. The 93 date that I give is forgoten but it is the 2nd worst depression in U.S. history.