What's Driving Oil?

The price of oil is not solely a manifestation of risk and fear from the Middle East. Currency devaluation, referred to as push inflation by Jim Sinclair, is playing a far-more significant role. Real (currency adjusted) oil prices remain within a down cycle since 2008. In other words, the magenta line crossed the median zone (came out of the red box) in late 2008.

West Texas Intermediate Crude Oil (OIL) AND Oil to Gold Ratio (OILGLDR):


Headline: Oil at the tipping point

Rising oil prices have become a fixture. The IMF declared this week that costly oil is here to stay, after a 12.5% average annual price increase over the past decade. Wall Street is betting the ranch on further increases. With crude hitting $110 a barrel in New York Thursday, up 17% this year, it's not looking like a bad bet.

But for all the talk of global economic growth and unrest in Mideast oil hotspots, there are signs that oil prices are already too high for pinched consumers to bear. U.S. gasoline demand, for instance, dropped 3.7% over the past four weeks -- which energy tracker Stephen Schork calls a "material decline."

Source: finance.fortune.cnn.com