The impact of Oil on the econmic recovery

As I read all the reports about the glut of oil sitting in storage facilities around the world, it's hard to understand why the price of oil continues to climb past $70. I guess it's time to throw all conventional wisdom out the window or just conceed that the oil market is no longer driven primarily by supply and demand, but by some other force. Speculation?

When I hear the stories about commodities traders paying for full oil tankers to sit offshore in hopes of delivering the goods when the price of oil is higher, I get concerned. When you consider the impact the price of oil, and more specifically gasoline, has on everyone's personal budget, it's a bit unnerving to imagine how quickly the economic recovery can stall if the price of a tank of gas continues to escalate.

While speculators provide needed liquidity to the commodities markets, I'm of the opinion that they have become a much more influential participant in these markets than anyone could have ever imagined. The wild swings in energy markets has caught the attention of regulators as they consider how to curb the influence of non-market participants (speculators) in the energy markets in hopes of smoothing out the peaks and valleys. One of the biggest proponents of that are the airlines who are getting killed every time oil takes off to new highs. It's hard to manage an airline when one of your largest expenses (fuel)can fluctuate by 10% or more every 30 days.

A real economic recovery must have an increase in jobs and disposable income to be lasting. The gains in the market over the past few months have been built through cost cutting, not growth. Unless the growth follows shortly, the recent rally will have no foundation to serve as a base for a higher trading range.

Enjoy the rally! Hope you make a ton, but watch out for the wall on the horizon in the form of higher energy prices and the impact they have on each of our personal budgets. It's nice to see the market go up, but I'm not back to feeling rich again. We've still got a ways to go before you can call an end to the economic crisis.