OIL: WHAT LIES BENEATH

Contrary to popular perception, there may not be a global oil shortage. But what does that mean for investors in oil stocks?

India is scared. And this has a lot to do with oil prices. High oil prices lead to inflation which in turn leads to higher interest rates. The US Fed is facing sleepless nights because of high oil prices and its reactions are panic-driven. By the end of June, Ben Bernanke, the Fed chief, is expected to drive interest rates higher to scare off inflation.

A hike in US interest rates is likely to start an upward spiral in interest rates in emerging markets; but for different reasons. While the US economy is a stagnating economy, it has a lot to get scared of because of increasing oil prices.