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Oil Approaching $100 per Barrel

Posted by Steve Markowitz on August 23, 2012

The price of oil is skyrocketing, approaching $100 per barrel as shown in the graph.  The reason for the increase is not only due to supply and demand.  This increase is mainly due to the market’s belief that the Federal Reserve (Fed) will announce yet another round of Quantitative Easing (QE).  QE, where the Fed purchases Treasury bonds, is the monetizing of the Country’s debt.  History has shown that QE always leads to inflation and sometimes hyper inflation.

In advance the next round of QE markets are running up the price of many commodities including oil.  This will increase the cost of many goods, including food due to increasing fertilizer costs.  The effect on third world countries could be devastating.

As the Fed continues to intervene and manipulated markets there will be many unforeseen consequences.  Often the negative consequences have and will continue to outstrip the supposed benefits of these actions.  Yet the Fed and the US government continued down failed paths.

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