–It’s the great question about oil right now that no on seems to know the answer to. Is the price rise driven by good old fashioned supply and demand? Is it financial speculation? Is it a weak U.S. dollar? Is it a fear and geopolitical premium? Is petroleum exuberance?

–It’s probably all of these things. But saying that doesn’t get us any closer to figuring where the oil price is headed next. It could be $80. It could be $180. We’ve asked Gabriel to look at a chart. Sometime the chart will tell you something that the fundamentals miss. The chart is the language of the market: a picture of what’s happening between buyers and sellers. The chart has no opinions. It is what it is.

–While Gabriel Andre’s working at the chart, we’re going to depart from our normal inductive approach to finance and do what human beings have done for thousands of years when confronted with the inexplicable: look to the stars.

–”As per financial astrology,” reports Major Ajay (a financial astrologer) “the 17th week of year 2008 represents Saturn. Saturn will ensure that it brings highest volatility and profit booking in oil and metals in world futures market.”

–”During this week Sun is with Mercury and Venus, Jupiter is in his own sign, Mars will change Moon sign from Mithun to Karak and Rashi. All these combinations and conjunctions may show highest volatility in world stock market.”

–You can’t really argue with that, even if you know what it means. However it is now the 18th week of 2008. Mars is now ascendant in the markets, not Saturn. Ajay reports on the new state of the stars, although his conclusion is more or less the same. “Mars is very famous to bring highest volatility, profit booking in Oil and Metals in world future market.”

–Mars is the God of War. He brings volatility to the commodity markets and a great deal of uncertainty. Buyers versus sellers…bulls versus bears…inflation versus deflation…this is a market that only Mars could love. But where will oil go? What do the stars tell us?

–We reckon not even Mars knows that. And that is precisely the problem. There are so many factors affecting the oil price it is impossible to predict which is ascendant. The guess of a financial astrologer is likely to be just as accurate (or more) than the guess of a professional energy analyst.

–In fact, financial astrologers are probably more worth listening to. Their methods are more honest and they proceed empirically and inductively. They gather observations from the sky and then reach a general conclusion based on what they’ve seen. The quality of their conclusions is based on the accuracy of their observations.

–You may think we’re joking. And we are, just a bit. But what we’re getting at is the value of modesty in making your investment forecasts. You have to acknowledge what you don’t know.

–Inductive reasoning is a lot more modest that deductive reasoning, but deductive reasoning (proceeding from some untried, unproven principle or axiom) is much more common in the financial industry….stocks always go up…buy the dips…diversification works.)

—When you trust your own experience and the evidence of your senses, you’re basing your judgments only on what you really know (or think you know). Your information is always incomplete. But at least the probability of your conclusions is based on historic observations and not on unquestioned axioms or investment clichés.

–The trouble with most energy analysts and all politicians is that they make their market forecasts deductively. That is, they already have some assumption about what the oil price should be. This assumption influences everything else that comes out of their mouth. Take Hillary Clinton for example.

–Hillary is taking on OPEC in her campaign to get to the White House. She introduced a new plan yesterday to hold OPEC accountable to American consumers. Her website explains that, “Hillary is calling on the President to engage in immediate negotiations with OPEC members and, if no progress is made, file a formal complaint against OPEC countries at the WTO.”

–Translation (acknowledging the script for Team America). “We are very unhappy with you. We are going to send you a letter, telling you how very unhappy with you we really are. Really.”

–The proposal continues, “Filing a complaint at the WTO will send a clear signal to OPEC countries that the U.S. is committed to an open, transparent global oil market. Such a step will give OPEC members an incentive to increase production as well.”

–The only signal OPEC is paying attention to is the price signal. Despite the bellyaching, the high oil price hasn’t led to lower American demand. When that happens, we’d expect oil prices to fall. OPEC has every incentive to produce as much oil as it can at high prices. But as oil producers, OPEC nations have to manage their resource-and not for the benefit of American consumers, but for themselves.

–Here’s the great part of Hillary’s proposal. She’s going to change the law so Americans can sue OPEC! Here changes would, “Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.”

–How unfair is that? You can’t sue foreign companies for violations of your own national laws? Here you get a glimpse of the supra-nationalist tendencies of Hillary (and most politicians, to be fair). “Hillary supports amending the Foreign Sovereignty Immunities Act so that the Justice Department can bring suits against OPEC countries in U.S. courts for price fixing. Changing the rules would help hold OPEC countries accountable for their decisions.”

–Absolute first class grade-A garbage. OPEC only controls 40% of world oil production. It is a major force in the supply of oil. But getting OPEC to pump more oil isn’t going to solve the problem of Peak Oil. It will only accelerate the rate at which we deplete existing reserves.

–And really, is there a more heavy-handed, ham-fisted, lame-brained, anti-Liberal example of big government at its worst? Changing the rules to favour one group over another is the standard tactic of anti-free market do-gooders. The rules usually get changed to favour one group over another, depending on the political flavour of the day.

–This reduces all politics to a contest over who gets to make the rules. It concedes that meddlesome rule-making is the appropriate role for government. Wouldn’t it be so much simpler if governments stuck to general rules that were fairly applied, without prejudice, to all people?

–In any event, it’s going to be an entertaining few months in politics. Which American presidential candidate can make the biggest basic economic blunders. It’s a three-horse race between Clinton, Obama, and McCain. They will all win…and it’s a pretty sure bet the American people will lose.

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