Why there are no one-armed economists

Last week I wrote a press release discussing the impact of the FOMC's decision to reduce the federal funds rate by an additional 25 basis points on the price of energy in the U.S. Relevant exerpts from he text of the release follow:

"The Federal Reserve announced its intent to lower interest rates for the third consecutive FOMC meeting providing a cumulative 100 basis point reduction for the year. The double-whammy impact of declining housing values and rising energy costs on consumer wealth has reduced consumer confidence. Since the U.S. economy is so dependent on consumer spending, economists are forecasting a sharp decline in GDP growth in the fourth quarter from 4.9% in Q3 to 1% in Q4. The apparent collapse of growth coupled with the continuing credit liquidity tightness caused by SIV damage in the financial industries left the FOMC little alternative but to reduce rates.

While lower interest rates will improve credit conditions and hopefully reverse the economy's trend away from a recession, it is certain that further declines in the dollar relative to the Euro, Yen and Pound will occur. For an economy which imports a large fraction of its energy needs, this leads to increased energy costs. Following the September FOMC meeting, oil began a began a 33 percent increase from $75 to $99 per barrel over a 10-week period as the dollar fell by 5 percent relative to the Euro and Pound. Oil prices have recently fallen back as information began to indicate a dramatic slowing of U.S. economic growth, reducing demands near-term.

A continuation of rate cuts signals the market that the Fed is willing to risk further commodity inflation in order to avoid a recession. This signal should reassure the energy industry that demand growth will continue on trend.
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A belief that demand will be sustained, coupled with a likely decrease in dollar foreign exchange rates, insures that oil prices will remain at the high end of Platts expected range, if not return to the $90+ highs recently established.

..."

In less than a week, the need for the qualifier "on the other hand …" surfaced with respect to oil prices when:

-- Mid-week, after the FOMC announcement, European Central Bankers decided enough was enough and began to lower their interest rates to avoid further increases in the value of the Euro and Pound relative to the U.S. dollar. This caused the dollar to appreciate by 2.7 percent and caused oil prices to begin a fall back to the high $80/barrel range late last week.

-- On Sunday, Turkey began large scale military incursions into Northern Iraq to attack PKK rebels strongholds along the border. This temporarily drove prices up early in the week while analysts considered the implications and risks to supply.

-- Today, after several months of commercial inventory declines, the market is growing more skittish as the U.S. commercial crude oil inventory falls below 300 million barrels and prices are moving back up in response.

What's a market analyst to do with six percent up and down price movements over a five trading day period driven by a variety of influences: foreign exchange improvements, geopolitical downturns, and physical inventory shrinkage? I am thinking of asking for another arm as a Christmas gift, so I can say "On the other hand, ..." with more conviction!