Oil Prices Will Hike in 2012

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Well, we’re four days into 2012 and already things are getting interesting…

As if they weren’t already.

As you know from reading The Gorrie Details, I expect the price of oil to rise significantly in 2012.

And I’m not the only one.

Oil is going to be a huge story this year.

In fact, prices are already up 4%...3 days into 2012.

With greater demand from the BRIC countries (Brazil, Russia, India and China), a rise in price of oil should surprise no one.

But there are other more pressing factors that will lead to higher oil prices…

Perhaps dramatically higher oil prices.

What do I mean?

Speculators Not All To Blame

Let’s look at the current price situation.

Today, oil is currently at about $100 per barrel.

It has fluctuated from around $70 to above $100 per barrel in the past couple of years.

As you might expect, speculators are blamed for some of the price rise.

But with world events unfolding as they are, there is plenty to speculate about.

Some expect to the price to be $150 per barrel by this summer and oil futures reflect that expectation.

This will be a big problem for the US in many ways.

The downside for paying $5-$6 for a gallon of gas is not only in the added financial hardship of millions of Americans...

It will also cause inflation in many other parts of the economy, causing a reduction in output due to spiraling costs.

In the 1970’s, this was known as stagflation…

Stagnant growth, or even recession, with high inflation.

This outcome is not for certain, but is certainly possible.

Election Year Battle

Another effect of rising oil prices will be felt in this election year.

It will also make it very difficult for Barack Hussein Obama to persuade the American people that he deserves a second shot at America.

For many of us, he has taken enough shots at America as it is…

But will oil prices rise as much as speculators think?

Very probable.

In fact, it may be happening as we speak.

Because before Obama goes to battle against the next Republican presidential candidate…

He will have to battle Iranian President Ahmadinejad(A-Jad).

What could possibly set these two “free market, liberty loving giants" against one another?

After all, when Iran was having its own Egypt moment in 2009, did Obama tell the little Persian potentate that it was time to go?

Did the US do or say anything at all against the murder of unarmed, freedom seeking students marching against Iran’s despotic Islamic regime?

Did we even lodge a protest at the UN?

No, no, and…no.

But, the Teleprompter-in-Chief did write a really sincere letter…which even now lines a birdcage somewhere in Tehran.

So with all the love that our President of all 57 United States has given Iran, why would A-Jad have his nickers in a twist?

Because…

The Iranians have the audacity of proceeding in their quest for nuclear weapons and long range delivery systems…ahead of schedule.

At least, that is what they would like us to believe.

Whether they are ahead of schedule or not, it puts BHO in a bind.

On the one hand, the US feels compelled to tighten international sanctions on Iran in response to its nuclear program.

This is helped along because Israel is not of fan of a nuclearized Iran and has a history of, shall we say, taking things into their own hands when it comes to their survival.

And no one in the Israeli government believes that the President of the United States is concerned with Israel’s survival.

So the prospect of an Israeli strike on Iran—and an escalating conflict—would cause oil prices to rise.

And wouldn’t you know?

Iranian nuke scientists have picked up the nasty habit of dying by unknown assassins lately…

And large explosions at nuclear facilities have been occurring quite frequently…

So the possibility of conflict between Israel and Iran is there…

And thus, the US sanctions are meant to convince Iran to stop their nuclear plans...before things get really out of hand.

A-Jad In A Corner

But from A-Jad’s point of view, these sanctions are putting him in a tight corner of his own, ginned up economic numbers notwithstanding.

The economy in Iran isn’t great right now, and social stability is due only to hardline oppression.

A-Jad needs the Iranian economy to recover, and rising sanctions will thwart that.

That is why the war games in the Straits of Hormuz have been played with so much flair.

Iran has threatened to close the Straits and prevent oil tankers from passing through.

This also would send oil prices skyward.

Which is why a US naval battle group is in the area.

Higher oil prices would certainly help Iran’s economy, which A-Jad needs badly.

And this is the problem.

As noted above, Obama cannot politically afford to have oil prices rise.

But A-Jad may not be able to politically or economically afford for them not to rise.

Remember, he’s got a pack of Mullahs on his back, riding him like a rented mule over the economy, his posturing, domestic stability, and  Iran’s influence abroad.

The student rebellion of 2009 was a big black mark against his leadership in the eyes of the Mullahs…

Further mishandling the economy would be another.

So, we have two leaders, each whose political interests are at odds with the other…

And each whose political survival is on the line.

Combine this with the Israeli position, neighborhood Arab governments falling like dead leaves in Autumn, rising demand from the BRIC countries, and the knowledge that the US has yet to attack a nuclear armed country, and you have one hell of a mix of danger, want, conflict, political calculations, and uncertainty.

And at the center of it all is…oil.

Can you think of a reason—any reason--for oil prices not to rise in this scenario?

And those are…The Gorrie Details.

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One Comment

1. 

   Alan

   January 4, 2012 at 8:13 pm

   I agree with the article in general but not with the point that the demand for oil by all the BRIC countries will result in a price increase - what I mean is that unlike India and China, Brazil and Russia are major suppliers, so why should they contribute to a demand-fueled price increase?

   Reply