A victory without spoils

Although no one really knows what will happen in the Middle East later this year, it is becoming increasingly precarious to generate any macroeconomic

The main concern is not so much what happens in Israel, but George W. Bush's announced plan to invade Iraq later this year unless Saddam Hussein completely mends his ways. That stem warning might be enough to eliminate another war against Iraq, but based on past performance, it would not be good planning to ignore the situation.

Anyone who has bought gas recently knows that gasoline prices have risen about 25 cents a gallon over the last two months. Some of this increase is seasonal. Nonetheless, most of the increase has stemmed from a $10 per barrel rise in benchmark crude oil prices.

Analysts have not been hesitant about suggesting that the rise in oil prices stems directly from the increase in Middle East tensions. That certainly played a role, but in addition, some recent gains are due to the simultaneous recoveries in the U.S., Japanese, and European economies. Oil prices are likely to remain above $25 per barrel this year even if Middle East tensions abate. I expect to see isolated examples of gasoline prices above $2 per gallon again this summer.