OPEC Is in the Catbird Seat

And the kicker is (it's a source of aggravation for U.S. motorists), the price is high despite low-to-modest oil demand: most major economies, including the energy-hungry U.S. economy, are only beginning to pull out of recessions. Low demand, but still high oil prices: for OPEC, it doesn't get much better than that.

And that's why the group is likely to maintain production quotas. In normal times, they'd probably cut production, given slack demand and ample supplies. But, as most investors know, we're not in normal times -- it's the post-financial crisis era, with its dollar-weakening large U.S. budget deficits. And one factor in oil's high price? The weaker dollar, which has added $15 to $25 to oil's price, depending on the economic model one uses.

Energy Analysis: Hence, given that the U.S. budget deficit is one major factor in the dollar's value, and given oil's price, it behooves Congress to cut the budget deficit -- via both tax increases and spending cuts -- as soon as the U.S. economic recovery achieves sustainable growth status. In fact, given current oil demand trends, the number one factor in oil's price in 2010 may be Congress' fiscal policy.

Let's hope Congress is listening.