Investors,

Oil is by far the number 1 traded commodity on this planet. It is estimated that at present the world consumes around 30 billion barrels per year and this is increasing. That has at $100 per barrel a 3 trillion dollar value. That is a lot of dollars.

Most of this oil is still priced and traded in US dollars. Thus the higher the price of oil goes the more US dollars foreign countries have to keep in order to purchase the black gold.

Thus no matter how much the US administration say's they would like the price of oil to come down, you will not see the price of oil go down because it serves to soak up significant amounts of the money the US is printing. This is important because if the world did not need to trade oil in US dollars than much of that physical money would find it's way back into the FX exchanges and eventually to the US shores itself. This would create huge price inflation and possibly hyper inflation in the US. Needless to say this would create large social unrest in the US to put it mildly.

The US administration is trying everthing in it's power to put of this eventuallity because with social unrest eventually comes changing of the guard. The old boy's club in charge is not willing to let this happen. At least not before they have drained every last drop of blood they can and are well away from the chaos with some fall guy in charge.

Iraq was invaded shortly after they started to trade oil in Euro's. In part the invasion of Iraq was to serve as a lesson to other countries what would happen if they abandoned the Petro dollar support. Unfortunately for the US, its military is bogged down in Iraq. Iraq has paid the price and other countries have now taken advantage of the situation to cut their petro dollar connections.

Russia, Iran & Venezuela now openly demand Euro's for their oil. Other countries are also starting to get embolded. The big standout's still supporting the Petro dollar are the Gulf producing nations, however there has been large rumblings among them of severing this connection. This is due the effects of inflation that they are suffering as a consequence of pegging their money to the US dollar in order to support the greenback. Their populations are starting to get angry that they are suffering this price inflation imposed upon them due to the monetary inflation policy of the US. The rulers of these nations who are not all that well loved in the first place are starting to feel the heat and are looking to jump ship on the US.

There has been a lot of smoke lately, about cutting their ties to the US dollar, coming from these countries and where there is smoke there eventually is fire.

The latest news is appearently the Gulf Cooperation Council aims to introduce a single currency by 2010. This bloc includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE.

If these countries abandon the petro dollar, say good night to the value of the US dollar.

Of course the value of gold would skyrocket and the value of any gold companies with significant gold reserves. Like ARU.

Regards,

F.F.