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Since getting creamed in the mid-term elections, we have not heard much sabre rattling out of the Bush Administration in terms of Iran. As you are well aware, Iran continues to move forward with their uranium enrichment program, and Israel is very upset.
Recent media focus has been the US troop surge in Iraq. I would hardly call an additional 30,000 troops a surge. If an additional 130,000 troops were sent to Iraq, I would call that a surge. My initial reaction now is why only 30,000?
Here's a thought. On January 7 the London Times reported that Israel has drawn up plans to bomb Iran's nuclear facilities with tactical nukes. So, what role would the US play if Israel went ahead with their plan? My guess is the US will only play a supporting role in the attack by allowing the Israeli's to use Iraqi airspace.
Tell me this would not wreak havoc in the oil market.
I realize these rumors have been circulating for quite some time, but the follow through may have been delayed because of the November elections. With the elections behind us, talk of an attack on Iran is heating up.
Last week the Energy Information Administration reported that crude oil inventories fell for the 6th straight week. What gives? Are the Strategic Petroleum Reserves now adding oil again after postponing purchases just prior to the elections? I have been looking for the most recent data on the SPR, but nothing has been reported since October 2006.
This morning, various news sources reported that Iran's Supreme Leader Ayatollah Ali Khamenei, said that "Tehran would never yield to international pressure to deprive it of its right to nuclear technology".
My guess is the fall in oil inventories and the problems with Iran have something in common. Crude oil is trading up this morning as forecasts call for declining temperatures in the United States, and a Russian pipeline that supplies about one fifth of Europe's demand was shut down.
Clearly, something is going on. I have added to my oil investments recently, and plan to hold for quite some time.
At this stage of the game, I have to agree with Jim Rogers;
"If the fundamentals for increased prices remain, prices will continue to rise. Show me where major new sources of oil supply are going to come from and I’ll buy the idea that oil is going to decline in price long term."
As far as oil prices dropping because of a weak economy, Rogers said this;
"That’s not how it works. During a time when many of the world’s largest economies were in recession in the 1970s, oil prices increased several fold. The UK went bankrupt during that period and had to be baled out by the IMF. But oil and commodity prices boomed. Another major boom in commodities started during the depths of the Great Depression, in 1933, during what was arguably the worst collapse in global demand in history. Global trade fell more than 50%."
