The price of oil is now around $115 per barrel. It just keeps going up and it seems like nothing can stop it. Oil is a tough investment to call right now. There obviously continues to be a mess in the Middle East (Iraq in particular) and this contributes to a fear of decreased supply. There is also higher demand worldwide as countries like China and India grow.

If you are invested in oil or oil related stocks/ETF’s, then you should beware. If the U.S. goes into recession (which may already be the case), then many parts of the world will probably suffer economically as well. A recession that spans a large part of the globe will weaken demand for oil and could send the price plummeting. The Federal Reserve, despite all of its gimmicks, has actually been tight the last couple of years under Bernanke. The money supply has gone up only slightly and this could trigger the bust following the boom. Of course, much of the boom was artificial that happened because of Greenspan and his inflationary policies.

There is one thing that would make oil continue to go up in price: Iran. If Bush decides to attack Iran, then oil will probably double in price within a short time span. This scenario seemed unlikely a couple of months ago, but now the conversations about Iran have picked up again. Hopefully the Bush administration will not do anything crazy like bomb Iran, but we can’t really be sure given everything that has happened so far.

Therefore, my recommendation is: if you think the U.S. government will attack Iran in the near future, buy oil options, oil stocks, oil ETF’s or anything that would go up with the price of oil. If you think war with Iran is unlikely, stay away from oil investments in the near term. Unfortunately, it is hard to predict what the crazy people in Washington D.C. will do.