Obama’s Devious Plan to Crush Gasoline Prices

In an election year reminiscent of George H. W. Bush’s 1992, recent polls reveal President Obama’s sudden drop in approval ratings can be directly tied to the economy, but more precisely, to gasoline prices.

Three polls conducted in March show the President dropping sharply among those who approve of his performance, with the NY Times/CBS News poll registering the lowest and most dismal 41 percent approval rating. Sign-up for my 100% FREE Alerts

Details of the three surveys strongly suggest that Americans, though still upset about the lack of well-paying jobs, are most angry about rising gas prices—which have risen to levels hovering $4.00 in many states.

Republican consultant Mike Murphy told Bloomberg News that on top of a stalled U.S. economy and disappointing jobs picture, gas prices are destroying an already-tight family budget.

“I think the President suffers from a lack of public confidence in his economic leadership,” Murphy stated in an email. “Any bad economic news, in this case soaring gas prices, triggers a fast decline in his numbers. He lacks any reserve of support on economic issues to fall back on. This is a definite sign of political vulnerability.”

Not unlike the Operation Desert Storm of 1990, oil prices are expected to rise sharply if the U.S. executes a military strike on Iran, which would then not surprisingly lead to even greater economic woes for a troubled U.S. economy.  Some have even suggested that a spike in the price of oil to the $150 – $200 per barrel level this year could finish the U.S. economy, leading to a dollar crisis.

Economists strongly believe that escalating gasoline prices pushed the U.S. economy into recession in 1991, torpedoing any chance of a second term for George H. W. Bush.  Undoubtedly, the politically battered Obama doesn’t intend to make the same mistake.

—Obama’s plan to crush gasoline prices in time for the Fourth-of-July weekend

On Mar. 24, not-for-profit International Movement for a Just World reported that preliminary U.S. government data show a 25 percent jump in oil imports from Saudi Arabia, “the highest level since mid-2008.”

“The White House has been scrambling for options to bring down gasoline prices — at a seasonal record high — during an election year, after concerns over an Iranian supply disruption launched benchmark Brent crude to over $120 a barrel not seen since the record price run of 2008,” according to the article’s authors Matthew Robinson and Jonathan Sau.

“Washington has urged ally Saudi Arabia to cover potential shortages when new U.S. and European Union sanctions are expected to reduce Iranian oil exports from July,” Robinson and Sau added.  “The Obama administration has considered releasing strategic oil inventories, potentially as part of a bilateral deal with Britain.”

How much oil the U.S. ultimately intends to stockpile cannot be known, yet.  But, so far, the number of barrels in play appears to be rather significant, which, ironically, makes a strong case for U.S. stockpiling contributing to the recent rally in WTIC above the $105 level, a level that could be unwound at more fortuitous time for the President.

Robert Fitzwilson, founder of boutique investment firm The Portola Group told King World News on Tuesday that, quietly, the U.S. is importing millions of barrels of oil in addition to its regular shipments from Saudi Arabia.

Fitzwilson speculates that the additional imported barrels could be used in the event that the Strait of Hormuz is closed during a military strike on Iran, or could be used to prepare for sanctions imposed on Iran to fully shut out the nation’s three-million barrels per day of production come the July 1 deadline for Iran’s customers to make other arrangements.

“Saudi Arabia is suddenly sending 22 million barrels to the United States.  Why did they do that?” Fitzwilson asked rhetorically.

“Are they trying to get paid for it before there is some sort of eruption in the Middle-East?  Is the U.S. stockpiling oil ahead of war?”

Maybe not.

Contrary to a growing consensus, war with Iran, if it actually happens, may not be executed until after the U.S. elections.  With the Fed expected to formally announce additional purchases of Treasuries and Agency debt in the coming months, a double-whammy response to the oil price from further dollar debasement and a war with Iran would usher a new president in as fast as President Bill Clinton was swept into the presidency in 1992.

A scenario, the one proffered by commodities guru Jim Rogers, of a relatively calm 2012 commodities market, with economic Armageddon reaching the U.S. in 2013, would make much more sense for a sitting president than an obvious $6 gasoline kiss of death during an election year.

“This is an election year in the United States, and a lot of politicians want to be re-elected,” Rogers told Opalesque Radio on Mar. 22.

“You should worry about 2013, you should be very worried about 2014, but this year, more or less, is not going to be so bad,” he added.

As expectations for record gasoline prices slated for this summer abound, President Obama, not only wants to continue talking about high energy prices during the campaign year, so he says, but he may also want to control the dialogue of gasoline prices with the American people all the way up to the Fourth-of-July weekend, at which time he simultaneously floods the oil market with the U.S. oil stockpile and makes peaceful overtures with Iran.

The Rogers scenario of a relatively quiet commodities market for 2012 just makes more political sense, assuming, of course, a Nassim Taleb Black Swan doesn’t spoil the plan.

Unlike the relatively thin gold market, whereby naked short selling can push the price of gold down during lulls in overseas trading, the oil market is much too big and deep for JP Morgan’s manipulation tactics to have any meaningful effect on the price.

Instead, that’s where the quiet stockpiling of oil can be then dump to trigger stop-loss orders in the futures pits, squashing the oil price with the physical commodity in conjunction with an orchestrated temporary cooling of tensions in the Middle East.  Gasoline prices will follow the oil price down.

Then . . . the coast will be clear for the disaster of 2013. Sign-up for my 100% FREE Alerts

Marc Faber: Where to Hide Your Gold

Fearful of desperate governments taking desperate actions during the coming currency crisis, Gloom Boom Doom editor and publisher Marc Faber advises investors to keep gold holdings outside the reach of potential confiscators.

Speaking with Chris Martenson last week, Faber believes that central bankers will print money at any sign of a credit contraction or drop in economic activity.  Money printing, Faber said, is a strong reason behind rising oil prices, slowing economic activity especially in those countries that import it.  Sign-up for my 100% FREE Alerts

The virtuous circle of money printing, higher oil prices, slower economic activity and more printing won’t stop, according to him.   Moreover, Faber speculates that, at some point, the money printing must stop and the financial system will become a catastrophe.

As the system begins to savage financial institutions in the U.S. and Europe, too many investors will experience what customers of MF Global experienced late last year.  In response, these investors will most likely then turn to gold.  But, in doing so, they will also come under threat of confiscation by governments desperate to save the system.

“As you know, we had MF Global.  What did the clients get?  Less than what they had at the company,” Faber told Martenson.  “And I think eventually the financial system will be an MF Global, where you don’t get your money back from the banks and the investment banks and from the mutual funds and so forth and so on.  And so I think everybody has to think to himself: how do I protect myself against the Black Swan event?”

In the past, several Fed Governors have suggested that the Fed should unwind, or at the least, level its balance sheet at the first sign of accelerating consumer price inflation.  Faber said that any talk along those lines by the Fed should not be taken seriously.  According to him, no matter what the Fed says, it cannot reverse the credit-based Ponzi scheme without collapsing the system.

“I think the money printing will go on, unless the Fed would come up and say, we’re no long going to print any money; the monetary base will remain steady,” said Faber.  “And even in that case I wouldn’t believe them.”

Martenson, who lost his $50 “placeholder” account with MF Global, asked Faber to speak on the subject of safe gold storage.

“Where is anything safe?  I mean, I think in a safe deposit box is relatively safe, but maybe not in a safe deposit box in the U.S.,” said Faber.  “If you look at the MF Global case, it seems—I don’t know for sure—but it seems some people got their money, but not others.  This is a very disturbing thing to happen in the financial system.  And when I see this, I think we have to be very prudent, so I would hold a safe deposit box outside the U.S..

“Now the question is: how is it to hold a safe deposit box with a bank if the bank closes down.  And this happens,” Faber continued.  “You can also hold safe deposit boxes in duty-free stores, warehouses at airports around the world.  In Switzerland we have them; in Singapore we have them, and so forth.  So that’s a possibility.”

Since the start of the financial crisis in 2008, Faber has said that, because the global economy is credit addicted, more and more investors over time will move into gold and equities as a means of preserving capital.  But there will come a day when central bankers cannot sell further debt issuance to rollover the ever-increasing mountain of debt.  That’s when governments will turn to gold and seek to acquire it by any means, including confiscation.

“One day there will be a credit collapse, but I think we aren’t yet there.  Before it happens they’re going to print,” Faber told Financial Sense Newshour’s Jim Puplava in early December.  “And when printing as it has done in the last 12 years in the U.S. leads to discontent populations, because when you print money then only a few players in the economy that benefit, not the majority of households.

“Populist political leaders vying for votes from the masses will opt to score easy points with the 90 percent have-nots at the expense of the haves, with draconian taxes on assets such as gold and silver held by the haves, not just through taxes on capital gains, but maybe even through a wealth tax on the holdings.

“This is what the tyranny of the masses can do,” he said.  Sign-up for my 100% FREE Alerts

Source: Transcript at ChrisMartenson.com; audio interview is here.

Marc Faber gets Gloomier Still

Marc Faber, publisher and editor of the Gloom Boom Doom report, told CNBC he expects a bigger correction than he earlier predicted.

Instead of a 10% correction he once saw for the S&P, he now expects the 500-stock index could drop to 1,150, sometime from August through October, or drop more than 16% from the May 2 high of 1,370.58.

“Usually what happens in the market, we have seasonal strength in January, then weakness in February, then strength in March-April and then weakness in May-June and then again a summer rally in July until early August,” Faber told Udayan Mukherjee of CNBC TV-18.

“So, we are moving into seasonally strong period,” he continued.  “But unlike many strategists, I don’t think we are going to make a new high. I think the S&P or the overall market in the U.S. will close 2011 at about this level or lower not higher as every strategist is predicting. I think we have seen the highs for this year, let us put it this way.”

Faber, who initially said on Oct. 26 he expected a 10% correction in the S&P, reiterated his call on Jan. 25, and once again reminded investors in an interview with Newsmax in early May, now sees a deeper correction of another nearly 100 points from his original prediction.

“I think we can rally to around 1,330 on the S&P now, but not make a new high above the 1,370 highs, which we saw in May,” he said.  “And then, in my view, we would be going down to maybe 1,150 on the S&P.”

As far as timing of the low, the seasonal weak period of late August through October will most likely be when the S&P bottoms at support at 1,150, according to Faber.  Historical data reveals very low volumes of incoming funds moving into stocks during the early fall months of September and October.

“I think the second half of August, September-October will be rough months,” Faber warned.

His overall thesis for stocks can be applied to commodities, as well.  Faber suggested that slowing economies in the U.S., Europe and China will bite into assets prices which have benefited from the risk-on tide of investment capital from money and hedge funds.  That tide is turning, according to Faber.

Risk-off trading is back.  He anticipates that oil, too, will drop another 20% from the already nearly 20% drop in Brent from its $127.02 print on April 11.

“I think all commodities are weakening at the present time, which essentially reflect a significant slow down in the global economy,” he said.  “We will weaken further, in my opinion, until about the end of December. I do not think that oil will collapse. I think we may go down to around $80-$85 per barrel [Brent] or so and then have further strengthening in the years ahead.”

Jim Rogers says Oil Price to Rise “beyond anyone’s expectations”

Speaking with the BBC, Tuesday, Jim Rogers said he believes oil prices will rise “beyond anyone’s expectations” in coming years.

The billionaire investor, author and co-founder of the legendary Quantum Fund also said the U.S. economy will “slow down” as a result of headwinds brought on from higher oil prices.

In firm responses to the host of BBC Hardtalk Stephen Sackur’s contentious questions, the 68-year-old Rogers reminded viewers of last year’s published IEA data, which strongly suggest that world oil production appears to have peaked in 2006—though the agency’s 2010 annual report didn’t make a definitive statement along the lines of the ‘peak oil’ theses.

Instead, the report, entitled, 2010 IEA World Energy Outlook, offered an assumption for plateauing conventional oil production through the year 2035 as a basis for withholding a ‘peak oil’ conclusion that many oil analysts now believe is reality.

“The IEA, the International Energy Agency, says the world’s known reserves of oil are declining at a rate of 6% per year.  There is no oil,” Rogers asserted.

When asked how high oil can go from today’s plus-$100 price tag, Rogers wouldn’t provide his best guess, knowing that bull markets can take prices to levels few people can imagine at the start of a multi-year rise in prices.  Instead, in typical Rogers’ style, he offered a couple of numbers he presumably knows will be easily achieved.

“Well, during the course of the bull market, during the next 10 years, 150, 200 [dollars].  You pick the number,” he said.  “I don’t know, but it’s going to go beyond anyone’s expectations, including mine. And I’m the bull.  But there will be corrections along the way.”

Rogers concurred with the BBC’s Sackur’s assessment that $200 oil will hurt many people within the U.S. and, indeed, other nations throughout the world, but also said many will benefit from high oil prices as well.

Just last month, the United Nations released an intergovernmental study on Climate Change which stated that as much as 77% of global consumption of energy will be met with solar power, wind and other forms of alternative energy sources by the year 2050.

That 190-nation UN study suggests that though some jobs will be eliminated from high oil prices, millions of new jobs in many new industries will be created worldwide as the result of soaring oil prices.

Moreover, the UN report stated that $12.3 trillion of investment into alternative energy sources to crude oil would be needed throughout the next two decades, or half way to the report’s 2050 year endpoint, to achieve 77% consumption of alternative energy sources by 2050.

“Some people will benefit,” Rogers said.  “Remember, there are lots of people in the world.  Somebody’s always benefiting and somebody’s always suffering.”

When asked to comment on the public’s perception that high oil prices are a result of speculators in the oil patch, Rogers said, “I know that’s great on TV and politicians like to say.  If you don’t have investment in the oil industry, where are we going to get the oil?”