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Friday, October 01, 2010

Oil, and the perfect storm!

Watch out for a substantial increase in fuel prices next week!

Numbers so far this week are pointing greater than three cents a litre up for all fuels I measure. Heating, stove oils, diesel and gasoline are all pointing higher amidst what I'm calling a perfect storm caused by investor speculation. Numbers are averaging a four cent a litre increase for most fuels right now.

Improving economic indicators like China growth in manufacturing, production quota compliance amongst OPEC members and a faltering US dollar against the Euro, are all painting a picture of an increase in prices that consumers are just not going to like next Thursday.

There is a danger on the part of speculators here however...

How far can prices for refined product, and oil for that matter, before consumers revolt and put a halt to any economic recovery? How far can prices go before higher prices begin to reverse an already tenuous economic recovery because it has removed important disposable income from the economy and the consumers hands?

My guess is that it's not going to be long before we see another retreat in oil because of the folly in the markets right now. Gold hasn't hit a record high for no reason at all...

Regards, and pass the word!

George

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