Weekend Edition: High Oil Prices Unwarranted

As I write this, Brent Oil is currently trading at $126 a barrel while WTI is trading at $112.50 a barrel. Believe me; this is not my dream scenario come true as I always reiterated that oil anywhere above $75 or $80 is very profitable for energy companies and comfortably supported by the global economy.

The downside to these prices is consumers spending more of their hard earned money on gas instead of in more useful sectors of the economy. These high prices will also trigger demand destruction as some people choose to drive less or use more public transportation.

Why is oil trading this high? Well it’s not because of Libya’s civil unrest since the lost Libyan production was offset by other OPEC members increasing theirs. While oil prices rise, OPEC does not see a need to hold any special meetings before its scheduled meeting in June. That’s because in OPEC’s view, the market is well supplied.

Then why is Oil so expensive? The UAE Oil Minister Al-Hamli puts it bluntly: “International markets are choosing to ignore market fundamentals and bet on the worse case scenarios.” OPEC still has spare capacity of 4 million barrels per day and inventories are comfortable across the world with high stocks in the US.

Last time oil hit $150 per barrel, we know what came next as it plummeted back down to $40. Is a repeat on the way? Commodity prices are screaming about rising inflation because of a continuously weakening USD. Commodities calling BEN, BEN, are you listening?

Economic roundup:

When Taxes Attack: Forced Out by High Taxes

Toxic Dollar: Why Nobody Seems to Want US Currency

Coxe Sees Turning Point for Markets

Americans to Fed: Prices Are Too High

Canada Weaning Itself Off US Trade

Weekly blog roundup:

Stay at Home Dads and Suga Mamas: When the Woman Becomes the Primary Breadwinner @ Invest it Wisely

You can learn financial planning tips from Guns N’ Roses @ My Own Advisor

Last Minute “Blogging as a Business” Tax Tips @ Young&Thrifty

Reviewing Spring Gardening Goals @101 Centavos

Investing: 3 walls to watch @ BalanceJunkie

6 advantages of dividend investing @ WhatIsDividend

Dividend stocks vs Corporate bonds @ TheDividendGuyBlog

Is Buy And Hold Investing Dead? @MoneyReasons

How To Invest In India @Money Cone

Gold Versus Dividend Stocks @ Dividend Growth Investor

What Motivates You to be Financially Responsible? @ Barbara Friedberg PF

The Lost Decade? @ DIY Investor