DAMN THE INFLATION                                         

Well, at the very least, the quibbling is over.  Crude oil prices hit an all-time, inflation adjusted high in yesterday's session, which was followed by  some profit-taking that appears to have, once again, quickly lost its luster.

The further weakening in the value of the US dollar and a panoply geopolitical issues helped further gains. As the dollar fluctuated, yesterday, energy prices seemed to perform directly inverse. To adhere the rhetoric, Venezuela is on the brink of war with Colombia.

There was a US military strike against an alleged Al Qaeda asset in Somalia. Israel accused Iran of being the manufacturer and source of recent rockets that have been fired into Israel, and the UN Security Council passed another round  sanction against Iran over its nuclear activities.

OPEC appears to have no intention increasing production to help lower prices. While some question OPEC's relevance, the current situation reminds us that they retain the capacity to make matters worse.

The growing consensus of an emergent S recession is doing precious little to engender bearish sentiment among market participants. While the question of sustainability of these price levels is at the fore, we cannot fight the tape.

Energy prices continue to get pumped on the commodity inflation wave that is a direct result of the weakening dollar. The Wall Street Journal, yesterday, chronicled, well, the decline is gasoline demand, and crude oil inventories are in-line with the their five year average.

Total motor gasoline is at multi-year highs even with refinery utilization rates six percent below normal. Therefore, as has been the case for some time, the fundamentals are not particularly instructive.

Although, crack spreads could come under considerable pressure with this fundamental backdrop. As far as prices overall, unless and until US policymakers decide to defend the dollar, the path of least resistance remains higher.

The economic salve of choice is cheap money, with large side of inflation as  tolerable consequence. Let's hope their aproach proves providential.

J. Kilduff