Tensions in Libya and the Middle East continue to put upward pressure on oil prices. WTI Crude Oil traded above $108 a barrel and Brent Crude traded above $120 on Monday — both hitting highs not seen since the 2008 spike.
Rising oil prices are on everyone's minds, including President Obama's. Last week, he announced a plan to curb U.S. oil imports by a third in ten years in an effort to make this country less dependent on foreign oil.
Obama's ambitious plan may help oil prices (and gas prices) in the long run, but right now the direction of oil prices hinges on Fed policy and whether it ends QE2 or pumps even more money into the market with QE3, says Chris Martenson, author of Crash Course. "[Liquidity] distorts a lot of things," he tells Aaron in the accompanying clip. If all things remain constant — like liquidity and supply disruptions in regions of unrest -- Martenson predicts, "we could easily see us surpassing $147 a barrel we saw in July '08 [and] we could easily get to $200 a barrel."
If he is right on those variables, it seems oil prices are likely to head higher. The unrest in the Middle East and Northern Africa is not abating and last week New York Federal Reserve President William Dudley played down the effect of the Fed's loose monetary policy on rising food, oil and other commodity prices. He also signaled more of the same is likely to come.
"While rising commodity prices may be giving some of you a bad headache, they are not likely to lead to a sustained rise in inflation to levels inconsistent with our dual mandate," Dudley said. And in terms of achieving that dual mandate, he said the Fed is still "very far away" of reaching price stability and high employment.
But, Monday Fed Chairman Ben Bernanke did reassure a concerned audience in Georgia that he does have his eye on the impact of rising prices on consumers. "We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability," he said.
So, what is your best investment opportunity in a climate where oil supplies are at risk and prices are on the rise? Martenson casts a solid vote for coal.
"I'm convinced the nuclear power is now dead in the water," he says. "Coal is something that can be shipped," is relatively safer compared to nuclear energy and far more accessible globally than natural gas.