The Price of Gas...

So it was only 5 months ago we were discussing how high the price of gas was and the things we were doing to save and cut back. Today the price of gas is nearing 5 year lows and even though I'm fairly well educated I'm left shaking my head. I just don't understand how in one breath the analysts were crying how supply is down and demand dictated the high price and now that has totally collapsed.

I would have never have wagered that the price of gas would be back under two dollars. If you look at the charts, the price of gas and oil has just about collapsed and is sliding further and further down. So is there a legitimate economic reason for this or does one have to put their tin foil hat on and say has someone said we either lower the price of fuel or the economy will totally collapse? I guess what I'm scratching my head about is how in only a matter of months we went from paying all time highs to five year lows? Something isn't right with this equation.

I honestly don't care what the reason is. I just love filling up my truck for under $25. :borat:

It wasn't just demand, it was speculation that drove up the prices. Demand has now plummeted, and speculators no longer have access to credit = Double win. OPEC is meeting this week and word is they will announce drastic cuts in production, but I've heard experts say demand is so low now they will not be able to drive up prices very significantly.

The news today said that gas prices rose a little bit today because of positive expectations on the auto bailouts, but I don't know how much.

I also heard that for every $1 that the cost of a barrel of oil drops, that $200 million gets pumped back into our economy because people have more spending money.

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Originally Posted by GothamSpotter

It wasn't just demand, it was speculation that drove up the prices. Demand has now plummeted, and speculators no longer have access to credit = Double win.

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Bingo! Most of the price spike had nothing to do with supply and demand, it was speculators using oil as a way to make a quick buck.

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Originally Posted by moose135

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Originally Posted by GothamSpotter

It wasn't just demand, it was speculation that drove up the prices. Demand has now plummeted, and speculators no longer have access to credit = Double win.

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Bingo! Most of the price spike had nothing to do with supply and demand, it was speculators using oil as a way to make a quick buck.

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Yet, when the prices were that high, all the "experts" were quick to announce that speculation had nothing to do with it. Guess they were all lying to us too, but, now we have proved it.

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Originally Posted by lijk604

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Originally Posted by moose135

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Originally Posted by GothamSpotter

It wasn't just demand, it was speculation that drove up the prices. Demand has now plummeted, and speculators no longer have access to credit = Double win.

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Bingo! Most of the price spike had nothing to do with supply and demand, it was speculators using oil as a way to make a quick buck.

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Yet, when the prices were that high, all the "experts" were quick to announce that speculation had nothing to do with it. Guess they were all lying to us too, but, now we have proved it.

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I think what we proved is our Gov't once again failed to protect the consumer by not outlawing speculation. The Gov't sat back and let this happen and look at the economy now. I really hope this changes with the new Administration.

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Originally Posted by T-Bird76

I think what we proved is our Gov't once again failed to protect the consumer by not outlawing speculation. The Gov't sat back and let this happen and look at the economy now. I really hope this changes with the new Administration.

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But not all the speculators were within reach of the US Government. If this happened on the international markets, there isn't much the US can do to regulate it.

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Originally Posted by GothamSpotter

It wasn't just demand, it was speculation that drove up the prices. Demand has now plummeted, and speculators no longer have access to credit = Double win. OPEC is meeting this week and word is they will announce drastic cuts in production, but I've heard experts say demand is so low now they will not be able to drive up prices very significantly.

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I heard the same thing. They would need to cut almost 3 million barrels a day to turn it around and that big of a cut is very unlikely. 1-1.5 million is more likely and its only likely to stablelize prices where they're at now for the most part. But I paid $1.49 a gallon today and I love it. I will say I do see more cars of the road during rush hour again and people I know who take the train say its more and more empty every day.

Just remember that as fast as it fell it could rise. Any kind of disruption to supply or terrorist action could make it skyrocket again...although I think it will be a long time before we see the prices of this past summer again.

With that in mind, I think hybrids will be a bargain for the foreseeable future, so I will be adding a second hybrid to my family fleet next spring. It will likely be another Lexus, but I have an open mind.

Let's just hope that the efforts to produce more fuel efficient vehicles does not stop because of the current price of oil.

There is another hidden benefit of low oil prices...it has a drastic effect on the budgets of places like Iran, Venezuela and Russia--which effectively limits their ability to do harm. When I visited my daughter at Georgetown I attended a lecture by a professor at the School of Foreign Service, and at the end I asked him what would happen to the Middle East problem if oil were made worthless, and he had a simple answer..."problem solved"!

Makes you think eh?

if OLPEC cuts supply won't that drive up the prices.
Down in Jersey its under $2.00. I'm not complaining lol just waiting for it to break 2.00$ in my area.

As long as I can fill up my car for 20-25 bucks im happy

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Makes you think eh?

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Yea but unfortunately we are a long ways from that. We will always need oil to a certain extent but with more fuel efficient vehicles and conservation we can make things better for ourselves.

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It wasn't just demand, it was speculation that drove up the prices

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Bingo! Most of the price spike had nothing to do with supply and demand, it was speculators using oil as a way to make a quick buck

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Actually guys that is just another factor that helps raise the price but it is far from being the whole reason oil spiked, Production, demand, monetary inflation and other market fundamentals still play a huge part in the price at the pump. I mean how does Coal and steel which have no spectulation have similiar spikes over the same periods? Also Moose people are buying from these contracts. Which is what price spectulating is. They don't have a gun to their heads making them invest that much before the oil is even produced. Opec knows this and has total control over production.

The Speculation angle is over for the moment; not to belabor the obvious but we're in a world wide recession at this point. Lot less demand, bottom line.

Of course if Israel takes care of its business with Iran between now and Obama's coronation, we'll see a catastrophic rise as the Gulf heats up....

Tom

Tom, I used to be one of those analysts. Most of my old job was researching commodities. I can tell you that most of my fellow analysts were talking out of their ass when they said everything was about "supply and demand" or "peak oil" or some other bull**** theory. These guys work for big hedge funds and investment banks who have wagered a lot of money into oil, gold, coal, or whatever. When they said that the price of oil/gold/etc. is going up, it's because they're pushing their investments to go higher so they can make money for themselves and their clients. Some iBanks were worse than others when it came to this. Goldman and Morgan Stanley were the worst. They leveraged heavy on oil (one Goldman analyst boasted that they control the price of oil and that it would soon go to $200/bbl). Well, it didn't happen. The entire global economy has tanked and just about everyone has lost their investments in commodities. Morgan and Goldman lost heavily in this bet (and deservingly so). So now, they're putting their cash in other things (the Dollar, the Yen, T-bills, etc.).