Oil falls by $8 over two days as supply worries dissipate

[Midnight Mike]

Oil down more than $8 in 2 days

Tuesday July 8, 10:12 am ET

Oil sheds more than $8 in 2 days as traders take profits and supply worries dissipate

VIENNA, Austria (AP) -- The price for a barrel of oil fell nearly $5 Tuesday, a two-day swing of more than $8 as traders took profits and fears of a supply disruptions eased.
But analysts warned the pullback could be fleeting.

"The plunge is really a temporary bull correction and is viewed by the market as a buying opportunity," said Victor Shum, an analyst with Purvin & Gertz in Singapore. "We are also seeing the U.S. dollar easing a bit ... and that has helped support oil pricing."

Trader and analyst Stephen Schork said the expectation just a few days ago that crude prices would touch $150 this week now "does not look like the proverbial done deal."

http://biz.yahoo.com/ap/080708/oil_prices.html

[T-Bird76]

With the 4th of July Holiday over prices are more then likely to keep falling. Most creditable experts agree oil will be around 80 to 90 bucks a barrel by Oct. The fact is the global economy can't sustain the high prices. I'd wager the national average will be around 2.35 a gallon by next year. We'll never see gas under 2 bucks a gallon again however.

[MarkLawrence]

And - since I've been living in the US - coming close to election time - the price always seems to drop as well - November is not that far off!!

[lijk604]

With the 4th of July Holiday over prices are more then likely to keep falling. Most creditable experts agree oil will be around 80 to 90 bucks a barrel by Oct. The fact is the global economy can't sustain the high prices. I'd wager the national average will be around 2.35 a gallon by next year. We'll never see gas under 2 bucks a gallon again however.

Oh Tommy, how I hope you are correct. I'd kill for $2.35/gal again.
These days of $4.00+ gal is putting a crimp in my major airport spotting!

[Lezam]

The question is, why aren't prices at the pump going down?

[adam613]

The question is, why aren't prices at the pump going down?

Because the gas stations are still paying for fuel that was purchased before oil fell $8/barrel. It takes time for oil price fluctuations to be reflected in energy prices.

[moose135]

Because the gas stations are still paying for fuel that was purchased before oil fell $8/barrel. It takes time for oil price fluctuations to be reflected in energy prices.

But then, why do they raise the price for the gas that's already in their tanks the minute crude prices go up? It's a visicous cycle, and consumers get screwed in the end, no matter what happens.

[Matt Molnar]

The question is, why aren't prices at the pump going down?

Because the gas stations are still paying for fuel that was purchased before oil fell $8/barrel. It takes time for oil price fluctuations to be reflected in energy prices.

Actually, it's kinda the other way around. They base their prices on what they think their NEXT delivery will cost. That's why they raise prices when the price of crude goes up, because they expect to pay more for their next delivery. When crude prices go down, they are slower to drop the price of gas so they can take advantage of the added margin cushion until other factors, like competition, kick in.

I tend to think gas station owners are the least evil piece of the whole equation. Their take is only about 10 cents a gallon...smaller than the government's and a lot less than the oil companies. Even Exxon is getting out of the retail gas business because even though it's profitable (mainly thanks to repair work and convenience store sales), the profits pale in comparison to their core oil business.