Why Is Oil High?

While our intrepid news media is trumpeting the new all-time high oil price, they are not reporting the likely reason:

The biggest puzzle is why oil prices keep on going higher and higher while the economy is clearly contracting and US oil demand is starting to fall. One simple explanation is the risk of a stagflationary supply side shock in the event of an Israeli attack on Iran’s nuclear facilities. This forum reported a week ago the views of Joschka Fischer – the former foreign minister of Germany – that such an Israeli strike is highly likely before the end of the Bush administration. Those allegations got reinforced this week by several additional factors: the Israeli deputy prime minister Shaul Mofaz (and likely future PM) stating categorically that “attacking Iran, in order to stop its nuclear plans, will be unavoidable”; the DEBKAfile report of June 3^rd stating that “Limited US attack on Iranian Revolutionary Guards bases in sight”’; all these confirming the headline in the May 20^th Jerusalem Post that “Bush intends to attack Iran before the end of its term”).

If you've been reading this blog, you already know all about this. As oil prices were dropping last week I was right at the edge of my buy price for oil. I, too, am anticipating an attack on Iran and wanted to participate in the wild ride if such an attack occurred. But alas, I just barely missed out.