What's Behind Oil's Climb?

This morning I got into work a little earlier just like many of my colleagues to prepare for the worst. On Friday as you very well know by now, the markets took a dive after crude traded up a mind boggling 9% in one day or 13% in 2 days. While many pundits today point to increased tension between Iran and Israel, weakness in the U.S. dollar due in some measure to Jean Claude Trichet's comments, the ECB president, about possibly raising rates and the day to day reality of increased global demand, I think two things stood out to me today.

One, the pure FEAR that oil prices could climb that much in one day caused people to panick. If oil could move up almost $11 dollars in one day, then why not $20 or $30? Two, oil is now an investment vehicle that many in the Hedge Fund community did not bet on and are now paying the price for with weaker than expected returns. Robert Gray brought this statistic up on The Opening Bell this morning. 97 Hedge Funds were up on average almost 3% through May with the Dow, S&P and Nasdaq in negative territory yet Oil year to date is up 40% and has doubled in one year. Have they missed the trade and some of what we are seeing is a catch up or group of fund managers chasing performance? Might they be jumping on the bandwagon?

What about the fear and possible anger that ensues from this? We talked as we do once every month with our panel of radio talk show hosts who said their listeners want answers and solutions, less rhetoric. What is being done to solve these problems? Look no further than the cover article in the New York Times about some people in areas of this country paying 13% of their income toward gasoline prices. John Felmy, the director for policy for the American Petroleum Institute says Americans on average today are spending 5% of their income as opposed to 6.9% in the early 80'. Why? Take a look. He joined us along with Stephen Leeb and Eric Bolling, who as usual disagreed about worldwide demand and where energy prices are headed.