Energy Prices Surge

Well, just when you thought it was safe to drive that big SUV again, oil prices start rising. Maybe if they scheduled elections three times a year, they could keep a lid on gasoline prices.

It was a wild week for stuff you have to pump, dig, or pull out of the ground led by surging energy prices and plummeting crop prices.

Gasoline is now up almost 27 percent since the beginning of the year followed by natural gas, heating oil, and crude oil that are up 23 percent, 13 percent, and 8 percent, respectively. Corn and wheat took it on the chin today, down 7 percent and 5 percent on the week, respectively.

Who would have thought that a crop report would get so much media attention as the one today where it was reported that a record number of acres will be planted for corn to be used in making ethanol.

All this commotion in the commodity pits is not good for your run-of-the-mill stock. Higher commodity prices lead to higher consumer prices and that prevents the Fed from doing what they do best - lowering interest rates.

While the major U.S. equity indexes now struggle to break even for the year, the model portfolio at the companion website Iacono Research ended the first quarter with a 5.4 percent gain. A portion of this gain came from energy commodities as crude oil ended the week, month, and quarter with a bang.


Big oil stocks have been dragged down with other big stocks, now up only a few percent on the year. Smaller, exploration and services companies are doing much better.


G0ld is climbing again getting reading for another attempt at $700, or so it seems. The European central banks have been selling lots of the metal in recent weeks but that has had little impact on the price. This week another percent or two was tacked on.


One of these days the gold producers are going to make their move - they haven't made much of a move for more than a year now. You can go back to early last year, before the gold miners ETF (AMEX: GDX) was created, and see the same level on the HUI Gold Bugs Index (AMEX: ^HUI). Here too, share prices for the smaller companies have recently outperformed the larger companies by a wide margin.


The dollar has shown some real signs of stress lately and this may just be the beginning. With China buying oil from Iran using Euros and the dollar share of foreign reserves hitting levels last seen in 1999, this could be a bit painful.

As feared last week, the every other Tuesday sell-off pattern failed to develop this week. That was a good thing - there have been enough sell-offs lately.

Disclosure: No position in XLE or GDX.