Expect $7 or $8 a Gallon Gasoline if Iran Closes Straits
Michael Pento, President of Pento Portfolio Strategies, was interviewed yesterday by Eric King of believes that Michael Pento is one of the few portfolio managers who truly understands how to manage investors through the current economic crisis, by applying strategies to profit from both the natural force of deflation and the man made force of inflation. In the end of course, the FED will win with a massive devaluation of the U.S. dollar, this is evident by not only the history of the FED, but Ben Bernanke’s current actions in dealing with the financial crisis that started in 2008. 

Pento had this to say about what is happening: “I believe that not only is the European currency being massively depreciated, but I believe the price of oil rising here, and breaking out on a technical basis, is presaging the beginning of QE3 starting in the second quarter of 2012. The other half of the equation is if you listen to the former Prime Minister and current Defense Minister of Israel, he is very clear that in the next two to three quarters there is going to be some type of military action against the nuclear facilities in Iran.”

Michael Pento continues: 

“It might come from NATO or Israel, but clearly the exogenous events, outside of the supply demand metric, are driving oil higher. Those events are, a military strike against Iran and a massive dose of quantitative easing throughout the globe. They are (also) closing down refineries in the northeast because they are not making any money. There are no margin compressions left to occur. You are going to start to see the price of gasoline at the pump rise, regardless if you see the price of oil continue higher.  

I think the price of oil has the potential to reach $150 to $200 a barrel in 2012, especially if Iran closes off the Straits of Hormuz. 30% of all sea-bound traffic goes through that Strait (of Hormuz). They can close it off and oil can go to $200 a barrel very easily. That would be very devastating to a consumer whose real wages are falling.   

This would shock people and unfortunately shock the economy. There is just no way the consumer could continue with any kind of discretionary purchases given gasoline, at the pump, north of $4 (per gallon), much less close to $7 or $8.”

The KWN Michael Pento interview is available now and you can listen to it by CLICKING HERE. believes that if we were to see these types of prices for gasoline, that this would be extremely bullish for the precious metals for 3 main reasons, 1. global instability 2. price inflation 3. the energy costs to pull the metals out of the ground would force a price increase, especially in silver where the physical supply is down to 1300AD levels.