I think there is some truth to 1 and 2, but I wouldn't bet on 3.  Oil prices to a degree elevated due to the lack of any spare capacity in the system.  This means that if there is an event that would cause a significant amount of oil to be taken off the market (~5% in the case of Iran) buyers who need oil no matter what are willing to pay a bit of a premium to ensure that they can get it at todays price rather than the highly elevated price in the future.  In the past there has been a large overhang of spare capacity that could kick in to cushion an event like this.  However, for the past few years oil producers have been pumping every last drop because of high prices and increased demand (except for some Saudi heavy crude that is so difficult and expensive to refine that most wont accept it).  Because of this any extended loss of significant supply would likely lead to huge spikes in the price. 

The decline in the dollar is significant cause of the increase in oil and other commodities, but oil has been increasing in every major currency lately so the effects might not be as great as hoped.  I'm also not sure how much Obama can really do to save the dollar.  We've got decades of built up irrisponsible fiscal policy to work through, Obama is no miracle man. 

I disagree with this.  Although it may be a goal and they may cheer high prices I am of the theory that OPEC no longer has any control over oil prices.  In order to have control they must have both spare capacity and the will to cut production.  I dont' think they have either anymore.  As discussed above the small amount of spare capacity they have is oil that no one really wants.  In addition very few OPEC members can willingly cut production since they are heavily dependent upon the huge revenue stream to keep their economies running and their populations from chopping off their heads!  As much as Ajob and Chavez hate America they love power even more. 

by alphasigmookie on 06/17/2008 03:07:02 PM EST

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