Is oil going to $2 a gallon soon?

As I have repeatedly stated, the oil futures market, which prices crude oil, is completely out of whack compared to real supply and demand figures. The problem is that institutional 'investors' consider commodity futures a valid investment class; the price flows in the futures market depend on the supply and demand of futures paper alone. With 'investors' taking and holding long-term positions, demand is high and supply low; the price balloons.

Similar flows pushed up the prices of vital food supplies last year and look like they may do so again.

Until governments get off their backsides and regulate the commodity markets to remove the speculative flows, prices will continue to bubble until the available credit is again exhausted, at which point they will crash. If they do so, the money will be available to actually invest in worthwhile ventures instead of just making us pay over the odds for our food and travel. That will help the economy and reduce inflation at the same time.

I suggest reading The Accidental Hunt Brothers, starting with their Reports [zipped PDFs].

There are signs that the amount of open interest is dropping, so the run may be coming to an end, but if so it's because they've run out of money to keep fuelling it rather than that the actual underlying demand is changing. The general trend on US highway travel has been down for about the last year and a half - it rose 0.6% in April compared to 2008, but it's still down at 2002 levels. The US is by far the greatest consumer of oil. If supply and demand were really controlling what's going on, last year's bubble should never have happened.

I live in a high-petrol-tax area. We pay over $6 per US gallon for petrol (102.9p/litre is the current lowest price near me). I think high fuel prices are a good idea to control consumption, though our system tends to damp price fluctuations, but I'd rather the high price was deliberate policy and used to fund worthwhile programmes, rather than to line investors' pockets.

 

would be weird, it might i have bad luck and got the Prius to save money on gas, so with my luck it will be 2 for years, lol.

I am worried that it if it does go to 2 a gallon it will lead to alot more idiots in suv's tailgatting me.

 

it would be awesome if the US could actually learn and pull their heads out and understand that we need to tax the cheap gas in order to encourage and continue with developing a green energy future.

every time gas prices dip, solar, wind, EV, etc all take hits on investment stocks etc. its no wonder why none of these technologies have made any progress other than isolated niche industries in various parts of the country.

 

all i have seen is prices going up, i certainly hope they will go down soon

 

I suspect the price of oil will fluctuate ... UNLESS

Congress passes the "energy bill" which is nothing more that a tax. It will not, cannot, make one difference in "global warming." In the event it should pass, I suspect gasoline could rise to unimaginable cost, along with electricity, food, and everything else in our society.

 

well gas has stabilized here with gas settling at $2.739 at Costco which is 3 cents lower than it was a week or so ago.

 

Good, it's about time we start paying the true cost of our supplies. Assuming the money gets put back into the right places of course.

 

I expect gas prices to drop a bit at the end of the summer. They are always high in the summer due to vacation travel. Premium gas is now 15-20% higher than regular vs 10% higher a year or so ago, so I would avoid cars that require premium.

I have also posted about oil futures speculation, and how it has created oil price volatility--especially the $4 bump last summer, which killed the car industry. Perhaps they have quietly done something about that.

I find it disturbing that the big money in this society is now made by hedgefunders and financial speculators, along with media-types, as opposed to people who actually make a product or provide a critical service (doctors come to mind). That is not a good sign for a country only 200 or so years old.

 

Disturbing is an understatement. I called that alarming.

It is as if ENRON and Madoff have become part of forgotten history and the same party animals are back at their game again..

 

We really haven't had the sort of widespread grass roots call for "heads-on-pikes" that is needed to flush this out of the system. Gordon Gecko is still the hero of too many.

Until we get medieval on white collar crime, it is going to keep stripping us of our hard earned savings about once a decade. Who in their right mind believes any financial statement from a publicly traded company any more? Due diligence? Good luck! The system has been designed to hide as much as possible from the investor--off the books accounting vehicles and risk are the norm. Regulators have been serving as screens to keep investors less informed, rather than working to keep them better informed. They protect the players they regulate, not the consumers that they are supposed to protect. The inmates have been running the asylum for too long. Good luck finding out a company's true financial condition or even its real profit or loss from the preceding several years.

IF we have another massive leg down (which I put at 50/50 probability) where the market bottoms at or below about 4,000 DJIA, then we might see a sort of regulatory blood bath that sends the supply siders out the door, and a restoration of more honest accounting, stricter limits, and less of the wild west "financial innovation" that has resulted in "too big to fail" bailouts to prevent utter collapse.

Heck, to pay for the bailouts and assuming that they will happen about once every 20-25 years (see the S&L crisis, etc.) all financial institutions/insurers should be Federally insured and paying premiums that will add up to several trillion of today's dollars over a generation. No "opt out" should be allowed. Let's assess them their true cost, and limit executive compensation so the leaches don't bleed us investors white.