Rising Oil Prices May Be the Forerunner to War
The headlines are widely publicizing the new highs being made in gold. Soon the news may be directed to gushing gold in the energy space … Black Gold.
Many of the fundamental reports I read on oil say that there’s an “oil glut”, and that the world is “swimming in oil”. That may in fact be true, but our motto at Coby Lamson is that “Price is Truth” and all else is just interesting commentary.
The rising price of oil and its potential impending breakout is telling a much different story. In this piece I’ll examine price trends (the truth), and I’ll also speculate as to what the rising price of oil may be telling us.
On July 18, 2008, our Grail Indicator gave us a sell signal at $130 per barrel. See this weekly chart:
Click to enlarge
On March 17, 2009, our Grail Timing Indicator then gave us the first buy on oil at 51 per barrel after its momentous decline. Just a few days ago, we just received a confirming momentum buy on the daily chart.
With a close above $77, we see oil possibly going to $92 or $107 per barrel. A rise to $92.26 would be a 38.2% Fibonacci retracement of the full down move, and $107.26 would be a 50% retracement of the collapse from the July 11, 2008, peak to the February 13, 2009, low.
Later in this article I’ll lay out a possible scenario that could push oil to new all-time highs. Should such a rise take place, it would rock both world markets and economies.
In my recently published book Discover the Upside of Down, there’s a chapter entitled “Black Gold: Boom and Bust profit opportunities”. I believe that we may be entering a time where we’ll witness the “boom” portion of that sequence. Chapter four of Discover the Upside of Down begins with this observation:
The proverbial “powder keg” in the Middle East has been hanging over world markets for a very long time. As the new century rolls along, the sparks are close to setting off a combustible explosion. The fuse is getting shorter on this powder keg explosion with fears of Iran becoming nuclear and a weapon possibly finding its way into the hands of terrorists. The fuse gets shorter by the day with the political instability of Pakistan, and even shorter as the US continues the war in Iraq. With so much instability in this region, it’s only logical to assume that the fuse is close to being lit and the explosion is set to incinerate global stock markets and economies.
As the Federal Reserve frantically prints new dollars in the new century to stave off a NASDAQ 2000-like real-estate implosion, the value of those dollars lessens and that affects the exchange rate against the other world major currencies. 
As the US dollar has fallen in the first several years of the new millennium, some nasty repercussions have resulted. Since oil is priced in US dollars around the world, OPEC has responded to the falling dollar with higher oil prices.
OPEC kept supplies tight to keep prices high. One reason it does this is to compensate for the reduced purchasing power of the falling dollar.
While oil-producing countries could decide to not accept US dollars, that would not only be the wrong economic decision, but would also be a very dangerous one.
When Iraq threatened to not accept US dollars as payment, it wasn’t long after that the US military invaded, and the leader who made that comment was roped and hung. Iran has recently followed Iraq’s lead and has stated that they “prefer the Euro or Yen” and no longer want to trade oil for “worthless dollars”.
Copyright 2009 Minyanville Media, Inc. All Rights Reserved.
Any of the oil $150 prediction is stupid. OPEC (including Iran) witnessed demand collapsing at $146 oil, no one wants to try that again. They know that if oil reaches certain level every alternative becomes attractive and when that happens people are not going back for oil. After wind turbine or solar panel are installed, what is the chance of switching back to fossil fuel? OPEC and Russia knows more than we do.
I say Empower their people with the Means Necessary and Watch what proceeds Before we Lube up the American War machine for yet another theatre.
What tools?
"I say Empower their people with the Means Necessary "
Empower them how?
Your response sounds well and good, but is tellingly short on details. I can see only three useful responses from the US:
1) Destroy and/or aid the Israelis in destroying the nuclear sites.
2) Assassinate the Iranian hard line leadership, and attempt to install a friendlier government.
or 3) Disengage and let Iran's neighbors worry about it. This would probably shortly be followed by the Israeli's doing option 1 and regional war.
I wish the Iranian people would rise up and they appear to have tried. Now we have to answer the question "Can we live with a nuclear Iran." If the answer is no, there does not appear to be a diplomatic resolution. I don't believe in punishing the population as a whole so I think an attempt at decapitating the leadership should be considered. Also, I do not believe that Israel can ever allow a nuclear Iran as they have clearly stated an intention to destroy Israel with a nuclear device. A violent confrontation seems inevitable. If so, it is better to do it now while the confrontation would involve conventional weapons.
some global turmoil of some sort -- maybe a new "missile crisis" a la cuba 1963 would do the trick in strengthening the dollar, giving the administration the perception of a backbone AND cow the iranians. the 3rd point is the tricky one of course.
i think the 'surgical strike' to decapitate the leadership, if such a thing actually can be done, is probably the best alternative to varyingly greater degrees of military escalation, up to and including invasion, with bunker busting being the most probable broad-scale military option.
anything to avoid a war w/iran -- where currently the 'new generation' is seemingly very pro-west. a war would change a lot of that sentiment and we'd be back to 1979 with flag burnings in tehran.
mccain could even sing in the senate ....
I suggest we cut off their oil exports, either by embasrgoing them or by destroying their production infrastructure. I don't think that would require Russian cooperation, a problem with import restrictions. We are going to get higher oil prices anyway, so why not deal with it upfront. Without the income from oil, the Iranian government, the mullahs, and the IRG will be in bad straits. It may be that the world's economies can adapt better to expensive oil than the folks running Iran can adapt to a lack of oil money. It might also be true that, for a while, at least, the world price of oil could stabilize at a price not catastrophically higher than now. The world's oil markets would have every incentive to produce and sell as much as possible knowing that the return of Iranian production is in their future. Speculators would be short because of the threat of peace. Well, its a thought!
And Israel destroying Iranian oil production capacity is clearly Israel's best option!
The Saudis, the Gulf states (Sunni, I believe), the Russians, et al, get to sell their oil for more money, so maybe they aren't quite so upset after all.
So how does the whole area go up in smoke (other than the burning wells, that is). Seems to me that the Iranians wouldn't have much military capacity without the oil money and besides they would be most interested in getting their oil back on line. The Iranian oil industry is where most of the IRG work, the Mullahs have gotten used to the good life (paid for with oil sales), and we still have a pretty good sized army and navy close at hand.
I think we need to get out of Afghanistan but play hard ball with the Iranians.
