Crude Oil...the Beauty and The Beast

Now that the price of crude oil has more or less double up from the lows of $30s per barrel at the beginning of the year to the current $70 range, everyone seems to be cheering, as reflected in the optimisms in the global stockmarket performances to-date, and many were making bold conclusions that the worst of the state of economy is over. However, questions remain as to the real cause of the price hike...could it be pure speculation at play or fundamentally driven? It could well be a combination of both, of course. The next fundamental question to be asked is that have the price run ahead of its fundamental too soon? What if the price of crude oil continue to rise above $80 for instance?

Not forgetting it was only not too long ago (last year in 2008) when crude oil price was driven up to $140 per barrel and there was massive problem in global inflationary pressures on all goods and services and subsequently caused havoc to global economies!

It is therefore important for the price of crude oil to maintain stability (around $50 to %70) and avoid catching the rocket (of over speculation)! If that happens, it will surely introduce another set of massive inflationary issues just when the global economy is barely trying to find its footing of recovery. More so, we are probably ahead of the fundamentals right now and nothing solid (such as corporate earnings and positive growth, increased demand, lower unemployment rate, etc) has come out of the whirlwind. Moreover, there is also the problem of potential US dollar devaluation and the possible hyperinflation the world has to tackle with, given the massive quantitative easing measures taken by the U.S!

So, beware of the beauty and the beast!