Price Of Oil

Will The Day Of Rage In Saudi Arabia On March 11 Send The Price Of Oil Into Unprecedented Territory?

The price of oil is shaping up to be the number one economic story of 2011, and right now the eyes of the investing world are closely watching the developing situation in Saudi Arabia.  All of the other recent Middle East revolutions have been organized on the Internet, and now all over Facebook and Twitter there are calls for a “Day of Rage” in Saudi Arabia on March 11.  The Saudi monarchy is attempting to head off any protests by promising to give $37 billion in “benefits” to the people and by publicly proclaiming that all political demonstrations are specifically banned.  In addition, the Saudi government is stationing thousands of security forces at various potential “hot spots” around the country.  So far similar measures have not done much to quell unrest in other nations in the Middle East, but Saudi Arabia will be a true test of the revolutionary fervor that is sweeping the region.  The Saudis have a long history of brutally repressing their own people.  They simply do not mess around.  So a revolution in Saudi Arabia will not be nearly as “easy” as it was in Tunisia, Egypt or Libya.  However, if a revolution does sweep across Saudi Arabia, it is going to send the price of oil into unprecedented territory.  Saudi Arabia is the number one exporter of oil in the world, and if their oil fields get shut down even for a little while it is going to have a dramatic effect on the global economy.  With the world already on the verge of a major sovereign debt crisis, the last thing it needs is for the price of oil to start soaring into the stratosphere.

Right now the investing world is not sure what to think about all of this, and financial markets do not like uncertainty.  One piece of really bad news could send markets all over the globe crashing down.

Speculation in oil futures is absolutely rampant.  A recent report on CNN noted the following….

The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it.

In particular, the number of investors that are betting that a revolution in Saudi Arabia is going to send the price of oil up to $200 a barrel has exploded in recent days.

$200 a barrel?

Are people actually betting that is going to happen?

The all-time record is only $147 a barrel.  Just a few months ago it was absolutely unthinkable to most economists that we could potentially see $200 oil in 2011.

But it would be a mistake to assume that a full-blown revolution is guaranteed to break out in Saudi Arabia.  Remember, this is a nation that has a very, very long history of denying even the most basic freedoms to the people.

For example, in Saudi Arabia the practice of any religion other than Islam is strictly forbidden.  By law, citizens of Saudi Arabia are not permitted to change religion.  Even foreign visitors are forbidden to openly practice any other religion.  It is a whole different world.  You cannot go to the store and buy a Bible in Saudi Arabia.  In fact, if you try to pass out Bibles in Saudi Arabia you will be thrown into prison.

Beheadings and other brutal public executions still happen in Saudi Arabia to this day.

So if you plan of being a revolutionary in Saudi Arabia you had better put your big boy pants on, because the Saudis play hardball.

Much of the rest of the globe is desperately hoping that a revolution does not happen in Saudi Arabia because the global economic situation is precarious at best.

In Europe, if the price of oil causes a significant economic slowdown right now it could have global implications.  Moody’s Investors Service just slashed Greece’s debt rating three levels all the way down to B1.  But Greece is far from alone.  Several European governments are finding it much more expensive to finance their debts these days.  We are right on the edge of a major European sovereign debt crisis and the chaos in the Middle East could potentially be just the thing to spark a panic.

The United States could feel a rise in the price of oil even more than Europe because the U.S. economy is so spread out and it is so dependent on products from overseas.

Did you know that in 1960 only 8 percent of the things Americans bought were made overseas but that today 60 percent of the things Americans buy are made overseas?

It’s true.

So what would happen if the cost of transporting all of those products suddenly doubled?  All of the products we buy must be transported somehow, and a rise in transportation costs will be passed on to U.S. consumers.

But the truth is that the pain is already here.  Already, millions of American families are starting to feel some very real financial pain from the chaos in the Middle East.

From February 18th to March 4th, the average price of gasoline in the United States rose 33 cents.  That was the biggest two week increase ever recorded.

Ouch.

The rise in the price of oil has some broader economic implications as well.

The more the price of oil goes up the bigger our trade deficit is going become.  As the trade deficit gets bigger, that means that more money is going out of the country and less money is going to support American businesses and American workers.  When American workers lose jobs, that means that they aren’t producing wealth anymore and they aren’t paying taxes anymore.  Instead, they become a drain on the system as they start receiving government handouts.

When millions of Americans go from being productive, taxpaying workers to unemployed welfare cases it causes our federal budget deficit to become even larger.

Most Americans do not understand how connected our trade deficit and our federal budget deficit really are.  One feeds right into the other.

Unfortunately, the Federal Reserve seems to think that the solution to any economic problem these days is to print more money.

According to Atlanta Fed President Dennis Lockhart, if the price of oil goes up high enough, it could force the Federal Reserve to do even more quantitative easing.

Really?

One of the reasons why the price of oil and other commodities has been going up over the last six months is because of all of this reckless money printing.

Now Lockhart is saying that because of the oil price increases they may have to do more money printing?

How bizarre is that?

Unfortunately, several other top Fed officials have dropped hints about a possible “QE3” lately.  It just seems like the insanity never stops.

Let us hope that the Fed does not go there because the U.S. dollar is falling apart fast enough already.

In any event, the rest of 2011 is certainly going to be very interesting to watch.

Even if a revolution does not happen in Saudi Arabia, the price of oil will most likely continue to slowly move higher just as it has been doing for months.

But if a full-blown revolution does happen in Saudi Arabia, it could literally change the global economy almost overnight.  The entire world financial system would be thrown into a state of chaos.

Oil is the lifeblood of the world economy.  Without a continuous supply of very inexpensive oil, life as we know it would dramatically change.  Most of us just assumed that we would always live in a world where we would always have an endless supply of very cheap oil.

Well, the times they are a changing.

You had better buckle up because it is going to be a bumpy ride.

People Of Earth: Prepare For Economic Disaster

It is not just the United States that is headed for an economic collapse.  The truth is that the entire world is heading for a massive economic meltdown and the people of earth need to be warned about the coming economic disaster that is going to sweep the globe.  The current world financial system is based on debt, and there are alarming signs that the gigantic global debt bubble is getting ready to burst.  In addition, global prices for the key resources that the major economies of the planet depend on are rising very rapidly.  Despite all of our advanced technology, the truth is that human civilization simply cannot function without oil and food.  But now the price of oil and the price of food are both increasing dramatically.  So how is the current global economy supposed to keep functioning properly if it soon costs much more to ship products between continents?  How are the billions of people that are just barely surviving today supposed to feed themselves if the price of food goes up another 30 or 40 percent?  For decades, most of the major economies around the globe have been able to take for granted that massive amounts of cheap oil and massive amounts of cheap food will always be there.  So what happens when that paradigm changes?

At last check, the price of U.S. crude was over 104 dollars a barrel and the price of Brent crude was over 115 dollars a barrel.  Many analysts fear that if the crisis in Libya escalates or if the chaos in the Middle East spreads that we could see the all-time record of 147 dollars a barrel broken by the end of the year.  That would be absolutely disastrous for the global economy.

But it isn’t just the chaos in the Middle East that is driving oil prices.  The truth is that oil prices have been moving upwards for months.  The recent revolutions in the Middle East have only accelerated the trend.

Let’s just hope that the “day of rage” being called for in Saudi Arabia later this month does not turn into a full-blown revolution like we have seen in other Middle Eastern countries.  The Saudis keep a pretty tight grip on their people, but at this point anything is possible.  A true revolution in Saudi Arabia would send oil prices into unprecedented territory very quickly.

But even without all of the trouble in the Middle East the world was already heading for an oil crunch.  The global demand for oil is rising at a very vigorous pace.  For example, last year Chinese demand for oil increased by almost 1 million barrels per day.  That is absolutely staggering.  The Chinese are now buying more new cars every year than Americans are, and so Chinese demand for oil is only going to continue to increase.

Much could be done to increase the global supply of oil, but so far our politicians and the major oil company executives are sitting on their hands.  They seem to like the increasing oil prices.

So for now it looks like oil prices will continue to rise and this is going to result in much higher prices at the gas pump.

Already, ABC News is reporting that regular unleaded gasoline is going for $5.29 a gallon at one gas station in Orlando, Florida.

The U.S. economy in particular is vulnerable to rising oil prices because our entire economic system is designed around cheap gasoline.  If the price of gas goes up to 5 or 6 dollars a gallon and it stays there it is going to have a catastrophic effect on the U.S. economy.

Just remember what happened back in 2008.  The price of oil hit an all-time high of $147 a barrel and then a few months later the entire financial system had a major meltdown.

Well, as the price of oil rises it is going to create a whole lot of imbalances in the global financial system once again.

This is definitely a situation that we should all be watching.

But it is not just the price of oil that could cause a global economic disaster.

The global price of food could potentially be even more concerning.  As you read this, there are about 3 billion people around the globe that live on the equivalent of 2 dollars a day or less.  Those people cannot afford for food prices to go up much.

But global food prices are rising.  According to the United Nations, the global price of food has risen for 8 consecutive months.  Last month, the global price of food set a brand new all-time record high.  Many are starting to fear that we could actually be in the early stages of a major global food crisis.

The price of just about every major agricultural commodity has been absolutely soaring during the past year….

*The price of corn has doubled over the last six months.

*The price of wheat has more than doubled over the past year.

*The price of soybeans is up about 50% since last June.

*The price of cotton has more than doubled over the past year.

*The commodity price of orange juice has doubled since 2009.

*The price of sugar is the highest it has been in 30 years.

Unfortunately, the production of food in most countries around the world is very highly dependent on oil, so as oil goes up in price this is going to make the food crisis even worse.

Hold on to your hats folks.

Also, as I have written about previously, the world is facing some very serious problems when it comes to water.  Due to the greed of the global elite, there is not nearly enough fresh water to go around.  The following are some very disturbing facts about the global water situation….

*Worldwide demand for fresh water tripled during the last century, and is now doubling every 21 years.

*According to USAID, one-third of all humans will face severe or chronic water shortages by the year 2025.

*Of the 60 million people added to the world’s cities every year, the vast majority of them live in impoverished slums and shanty-towns with no sanitation facilities whatsoever.

*It is estimated that 75 percent of India’s surface water is now contaminated by human and agricultural waste.

*Not only that, but according to a UN study on sanitation, far more people in India have access to a mobile phone than to a toilet.

*In northern China, the water table is dropping one meter per year due to overpumping.

These days, one of the trendy things to do is to call water “the oil of the 21st century”, but unfortunately that is not a completely inaccurate statement.  Fresh, clean water is something that we all need, but right now world supplies are getting tight.

Our politicians and the global elite could be doing something about this if they really wanted to, but right now they seem perfectly fine with what is happening.

On top of everything else, the sovereign debt crisis is worse than it has ever been before.

All of the major global central banks have been feverishly printing money in an attempt to “paper over” this crisis, but it is not going to work.

Most Americans don’t realize it, but right now the continent of Europe is a financial basket case.  Greece and Ireland would have imploded already if they had not been bailed out, and now Portugal is on the verge of collapse.  The interest rate on Portugal’s 10-year notes has now been above 7% for about 3 weeks, and most analysts believe that it is only a matter of time before they are forced to accept a bailout.

Sadly, if the entire global economy experiences a slowdown because of rising oil prices, we could see half a dozen European nations default on their debts if they are not bailed out.

For now the Germans seem fine with bailing out the weak sisters that are all around them, but that isn’t going to last forever.

A day or reckoning is coming for Europe, and when it arrives the reverberations are going to be felt all across the face of the earth.  The euro is on very shaky ground already, and whether or not it can survive the coming crisis is an open question.

Of course there are some very serious concerns about Asia as well.  The national debt of Japan is now well over 200% of GDP and nobody seems to have a solution for their problems.  Up to this point, Japan has been able to borrow massive amounts of money at extremely low interest rates from their own people, but that isn’t going to last forever either.

As I have written about so many times before, the biggest debt problem of all is the United States.  Barack Obama is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars.  It is expected that the total U.S. national debt will surpass the 15 trillion dollar mark by the end of the fiscal year.

Shouldn’t we have some sort of celebration when that happens?

15 trillion dollars is quite an achievement.

Most Americans cannot even conceive of a debt that large.  If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

But the United States is not alone.  The truth is that wherever you look, there is a sea of red ink covering the planet.

The current global financial system is entirely based on debt.  If the total amount of debt does not continually expand, the system will crash.  If somehow a way was found to keep this system going perpetually (which is impossible), the size of global debt would keep on increasing infinitely.

Now the World Economic Forum says that we need to grow the total amount of debt by another 100 trillion dollars over the next ten years to “support” the anticipated amount of “economic growth” around the world that they expect to see.

The entire global financial system is a gigantic Ponzi scheme.  It is designed to keep everyone enslaved to perpetual debt.  If at some point the debt spiral gets interrupted in some significant way, we are going to witness an economic disaster that is going to make what happened in 2008 look like a Sunday picnic.

The more research that one does on the current global economic situation, the more clear it becomes that we are absolutely doomed.

So people of earth you had better get ready.

An economic disaster is coming.

Stagflation 2011: Why It Is Here And Why It Is Going To Be Very Painful

Are you ready for an economy that has high inflation and high unemployment at the same time? Well, welcome to “Stagflation 2011”.  Stagflation exists when inflation and unemployment are both at high levels at the same time.  Of course we all know about the high unemployment situation already.  Gallup’s daily tracking poll says that the U.S. unemployment rate has been hovering around 10 percent all year so far.  But now thanks to rapidly rising food prices and the exploding price of oil, rampant inflation is being added to the equation.  Normally inflation is a sign of increased economic activity, but when the basic commodities that we depend on to run our economy (such as oil) go up in price it actually causes a slowdown in economy activity.  When the price of oil goes up high enough, it fundamentally changes the behavior of individuals and businesses.  Suddenly certain types of economic activities that were feasible when oil was very cheap are not profitable any longer.  When the price of oil rises to a new level and it stays there, essentially what is happening is that more “blood” is being drained out of our economy.  Our economy will continue to function when there are higher oil prices, it will just be a lot more sluggish.

In some way, shape or form the price of oil factors into the production of most of our goods and services and it also factors into the transportation of most of our goods and services.  A significant rise in the price of oil changes the economic equation for almost every business in the United States.

Today, the price of WTI crude soared past 100 dollars a barrel before closing at $98.10.  The price of Brent crude increased 5.3 percent to $111.25.  The protests in Libya are certainly causing a lot of the price activity that we have seen over the past few days, but the truth is that oil has been going up for a number of months.  Right now we are only seeing an acceleration of the long-term trend.

Things are likely to get far worse if the “day of rage” planned for Saudi Arabia next month turns into a full-blown revolution.  Up to this point, the revolutions that have been sweeping the Middle East have been organized largely on Facebook, and now there are calls all over Facebook for the “Saudi revolution” to start on March 20th.

That date is less than 4 weeks away.  If Saudi Arabia plunges into chaos, the price of oil is going to go through the roof.

A rapidly rising price for oil is really bad news for the U.S. economy, because it is going to mean lots of inflation.  Unfortunately, this also comes at a time when the economy is also feeling the inflationary effects of more quantitative easing by the Federal Reserve.

So if rising oil prices are going to cause more inflation and if rising oil prices are also going to cause our economy to become even more sluggish, what does all of that add up to?

It adds up to stagflation.

Wikipedia defines stagflation in the following manner….

In economics, stagflation is the situation when both the inflation rate and the unemployment rate are persistently high.

This is going to rapidly become the “new normal” for America.  High oil prices are going to cause the cost of just about everything to go up, and high oil prices are also going to cause the economy to slow down thus making the unemployment numbers even worse.

It is going to be just like the 1970s all over again.

Only worse.

Economists differ as to how much rising oil prices affect U.S. GDP, but almost all of them agree that rising oil prices do cause a decline in U.S. GDP at least to some extent.

If American families have to spend $10 or $20 more each time they visit a gas station, that means that they are going to have less discretionary income.  They won’t be able to spend as much at the stores.

Not only that, but since the price of oil affects the price of almost everything else, Americans will find that their dollars have reduced purchasing power.

An oil crisis would force American families to stretch their already overburdened budgets even farther.

So where is the price of gasoline going from here?  Well, the average price of gasoline in the United States is rapidly sneaking up on the $3.20 a gallon mark.  Almost everyone believes that it is going to be going significantly higher.

Tom Kloza, the chief analyst for the Oil Price Information Service, was recently quoted in USA Today as saying that he believes that the average price for gasoline in the United States will reach somewhere between $3.50 and $3.75 a gallon by April.

As I wrote about yesterday, there are other analysts that believe that we are going to see $4.00 gasoline in the United States by the end of the year, and there are some that believe that we could see $5.00 gasoline if revolution sweeps Saudi Arabia.

If gasoline becomes that expensive and it stays there for a while, it is going to seriously start affecting the behavior of American businesses and American consumers.

Just remember what happened back in 2008.  Andrew Busch of BMO Capital Markets recently told CNBC the following….

“Remember when oil was last at $140 (a barrel), Americans reacted and cut the amount of miles they drove.”

Can you imagine what it would do to the economy if millions of Americans start sitting in their homes instead of doing their normal amounts of driving and flying?

In addition, one of the biggest problems with a higher price for oil is that it would cause our trade deficit to explode.  According to the U.S. government, more than half of the oil that we use is imported.  So every month we send the rest of the world billions and billions of our dollars and they send us massive amounts of oil.  We rapidly consume all of the oil they send us and we continually need more.  So we keep sending larger and larger amounts of money overseas and they keep sending us larger amounts of oil.  In the process, our national wealth is being drained at an astounding rate.  It is one of the greatest transfers of wealth the world has ever seen.

When the price of oil rises substantially, the transfer of wealth accelerates.  This is a very bad thing for the U.S. economy.  For example, when oil prices were above $100 a barrel back in 2008 our trade deficit for the year was almost 700 billion dollars.

It would be great if the Middle East would settle down and oil prices would start declining because that would really help out the U.S. economy.  Unfortunately, it does not look like that is going to happen.  Instead, it appears that we are steamrolling directly towards stagflation.  Anyone that lived through the stagflation of the 1970s knows that it is not a lot of fun.

The cold, hard reality of the matter is that without cheap oil our lifestyles are going to change.  Our economy was not set up to run on expensive oil.  If oil moves well above $100 a barrel and it stays there it is going to bring about significant societal changes.

For the rest of 2011, the price of oil will be the number one economic indicator to watch.  If it gets too high it is going to be an absolute disaster for the U.S. economy.

5 Dollar Gas? Get Ready To Pay An Arm And A Leg For Gasoline

One of the quickest ways to bring down the U.S. economy would be to dramatically increase the price of oil. Oil is the lifeblood of our economic system. Without it, our entire economy would come to a grinding halt. Almost every type of economic activity in this country depends on oil, and even a small rise in the price of oil can have a dramatic impact on economic growth.  That is why so many economists are incredibly alarmed about what is happening in the Middle East right now.  The revolution in Libya caused the price of WTI crude to soar more than 7 dollars on Tuesday alone.  It closed at $93.57 on Tuesday and Brent crude actually hit $108.57 a barrel before settling back to $105.78 at the end of the day.  Some analysts are warning that we could even see 5 dollar gas in the United States by the end of the year if rioting spreads to other oil producing nations such as Saudi Arabia.  With the Middle East in such a state of chaos right now it is hard to know exactly what is going to happen, but almost everyone agrees that if oil prices continue to rise at a rapid pace over the next several months it is going to have a devastating impact on economic growth all over the globe.

Right now the eyes of the world are on Libya.  Libya is the 17th largest oil producer on the globe and it has the biggest proven oil reserves on the continent of Africa.

Libya only produces 2 percent of the oil in the world, but with global supplies so tight at the moment even a minor production disruption can have a dramatic impact on the price of oil.

Before this crisis, Libya was producing approximately 1.6 million barrels of oil per day.  Now the rest of the world is wondering what may happen if revolution spreads to other major oil producing nations such as Kuwait (2.5 million barrels of oil per day) or Saudi Arabia.

Saudi Arabia produces 8.4 million barrels of oil a day.  It produces more oil than anyone else in OPEC.

If revolution strikes in Saudi Arabia and a major production disruption happens it could be catastrophic for the global economy.

David Rosenberg, the chief economist at Gluskin Sheff & Associates, is warning that if there is major civil unrest in Saudi Arabia we could end up seeing oil go up to $200 a barrel….

“If Libya can spark a $10-a-barrel response, imagine what a similar uprising in Saudi Arabia could unleash. Do the math: we’d be talking about $200 oil.”

200 dollar oil?

Don’t laugh – it could happen.

In fact, if it does happen the global economy would probably go into cardiac arrest.

The truth is that if the flow of oil from Saudi Arabia gets disrupted there is not enough spare capacity from the rest of the globe to make up for it.

Paul Horsnell, the head of oil research at Barclays Capital, recently said that the world does not currently have enough spare capacity to be able to guarantee that an oil “price shock” will not happen….

“The world has only 4.5m barrels-per-day (bpd) of spare capacity, which is not comfortable.”

Horsnell also said that even in the midst of potential supply problems, the global demand for oil continues to grow at a very robust pace….

“In just two years, the world has grown so fast as to consume additional volume equal to the output of Iraq and Kuwait combined.”

For now, Saudi officials are saying all the right things.  They say that there will be no revolution in Saudi Arabia and that there are not going to be any supply problems.

For example, Saudi Arabian Oil Minister Ali al-Naimi recently announced that the rest of the world should not worry because his country is definitely going to be able to make up for any shortage in the global supply of oil….

“What I would like you to convey to the market: right now there is absolutely no shortage of supply.”

But what happens if revolution comes to Saudi Arabia?

Suddenly the whole game would change.

But even with a peaceful Saudi Arabia the price of gasoline in the United States is already rising to alarming levels.

The average price of gasoline in the United States reached $3.14 a gallon last week.  This closely mirrors what happened back in 2008.  Three years ago at this time the average price of gasoline was right around $3.13 a gallon.

Let’s certainly hope that we don’t see a repeat of what happened to oil prices back in mid-2008.  The price of oil reached an all-time record of $147 a barrel and gas prices in the United States absolutely skyrocketed.

So how high will the price of gas in the U.S. go in 2011?

We haven’t even come close to 4 dollar gas yet, but a large number of analysts believe that it is coming this summer.

Is there even a possibility that we could see 5 dollar gas in America at some point in the next couple of years?

Well, there are some in the oil industry that are convinced that it could actually happen.  Just consider the following quotes….

Darin Newsom, senior analyst at energy tracker DTN….

“If this thing escalates and there’s a good chance that there’d be a shift in supplies, $5 gas isn’t out of the question.”

Peter Beutel, president of energy adviser Cameron Hanover….

“If you are looking at the disruption of movement and production in countries such as Saudi Arabia and the UAE, you’re easily talking $5 gas.”

John Hofmeister, the former president of Shell Oil, on his belief that we could see 5 dollar gas by 2012….

“I’m predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices.”

So why is everyone so concerned about gas prices?

Well, because it affects the price of almost everything else in the economy.

David Wyss, the chief economist at Standard & Poor’s, says that every extra dollar that is spent on gasoline is a dollar that will not be spent somewhere else….

“The money that you spend filling up your car is money you don’t have to spend at the shopping mall.”

Not only that, but when gasoline costs more it has a negative effect on economic growth.  Almost all economic activities involve the use of oil in one form or another.  When the price of oil starts getting really high it motivates people to start cutting back on many of those activities.

The truth is that our whole economic system is based on the ability to use massive amounts of very cheap oil.  Now that the price of oil is rapidly rising again, many economists are becoming very alarmed.

Nobuo Tanaka, the Executive Director of the International Energy Agency, recently told CNBC that his organization is extremely concerned about what high oil prices could do to the global economy….

“That is our concern, regardless of the margins of disruption, if the $100 per barrel of oil is continued in 2011, the burden of oil to the global economy is as bad as 2008.”

So what was so bad about 2008?  Well, the price of oil soared to $147 a barrel in mid-2008 and this was a huge factor in the financial collapse that happened a few months later.  Now oil prices are returning to levels that we have not seen since 2008….

So if the price of oil breaks the all-time record this year will we see another global financial crisis?

It is hard to say.  But what almost everyone agrees on is that it will not be good for the global economy at all.

In addition, a higher price for oil will also have a huge impact on the trade deficit.  Because oil prices were at such a high level back in 2008, oil imports actually made up almost 50 percent of the U.S. trade deficit that year.

In 2010, the U.S. trade deficit was just a whisker under $500 billion.  If the price of oil gets up to 140 or 150 dollars a barrel we could easily see the U.S. trade deficit explode to 700 or 800 billion dollars in 2011.

That would be really, really bad for the U.S. economy.

So where are oil prices going next?

Well, if you could predict that with 100 percent certainty you could make a whole lot of money.  Nobody knows for sure.

But almost everyone believes that the price of oil is going to go up.  In fact, a lot number of investors have been making some very large bets that the price of oil is going to go up very significantly this year.

Recently, large numbers of investors have been betting that the price of oil will rise to $125 a barrel by May.  Shockingly, some investors have even been betting that the price of oil will rise to $250 a barrel by next December.

Let us hope that the price of oil does not rise that rapidly, but as the past couple of months have demonstrated, the world is becoming a very unstable place.   Just about anything is possible at this point.

If the price of oil rises significantly above $100 a barrel and it stays there for an extended period of time, it is going to be absolutely devastating for the U.S. economy.

So what do you all think is going to happen to the price of oil in 2011?  Please feel free to leave a comment with your thoughts below….

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