Gasoline could drop 50 cents/gallon by spring

The whacky Californians are paying more than the rest of you for gas and diesel. We are trying to reconcile Malorn's prediction with our reality.

I'm not sure about the bitter name calling. I did use the term "republican" a couple of times, but I didn't direct it at anyone in particular. I think GWB and McCain do belong to that party.

Oh, yes, I did describe GWB as a moron. I'm sorry, it was just after listening to him speak on television. I was completely appalled at the time. I will try to find nicer terms to use in the future.

 

It never ceases to amaze me that if you give people a tax deduction, they think they are getting something for free. As you point out, they may have reduced the $110 down to something like $60. But they are still having to pay $60 (when you got away for $35).... But they got a tax write-off.... And one wonders how they can vote against their self-interest....

 

Alaska first state to hit $4 a gallon gasoline: AAA - Yahoo! News

 

A lot of morons would have been very offended I'm sure.

 

The term "voting against your self-interest" is redundant. When you vote, you are voting against your self-interest.

Re: The discussion on the reason for high gas prices, I was speaking to an investment advisor the other day, and he brought up a factor most people are not talking about: speculators. There are big players bidding up the price of oil in the belief that it will go higher still.

Futures markets serve a useful purpose if you are a producer or a consumer of any commodity and you need to be able to know the price of something in advance: A farmer who sells wheat futures is locking in the price of his crop, which helps him plan financially, and a baker who buys those futures can plan for the costs of his bakery. But when those futures are bought and sold by someone who neither produces wheat nor will ever take delivery on it, the market is distorted, and skilled speculators can extract value from the market without ever providing a socially useful product or service.

This can cause speculative bubbles which benefit the gamblers but hurt society as a whole by driving prices well above actual costs for production and distribution.

This guy believes that part of the present price of oil is the money extracted from the market by speculators.

Market forces, such as China's and India's demand, peak production, and the cost of extracting ever-deeper oil and lower quality hydrocarbons are important factors. But the speculators, that ever-present scourge of capitalism, may be playing a part also.

As for malorn, I feel sorry for the guy: He makes his living selling stinkers that are becoming more and more expensive to operate. But on the other hand, there's nothing stopping him from switching from GM to Zap. And his prediction of a drastic drop in gas prices at a time of year when they generally go up was pretty dumb.

 

Apparently the speculators don't have that much influence because they aren't hording oil. They don't affect the supply/demand equation that significantly. They do have an impact, but I read something the other day (on the internet so it must be true) that said the case against them is overstated.

 

I think the speculators are speculating that oil prices will continue to go up in the long term. That doesn't seem like too much of a speculation to me.

 

good point, mate.

 

I bet it was this:
http://www.nytimes.com/2008/05/12/opinion/12krugman.html

This is written by an economist (Paul Krugman) who writes a blog for the new york times...(i think its called The Conscience of a Liberal...so his opinion could be a little swayed i suppose).

His central argument is an econ argument, which I think he explains well....basically when people speculate, they have to buy the commodity up...and they end up hoarding it, which drives the prices up...but currently, there is no evidence of this 'hoarding' behavior, so his argument is that as much as people want to believe this is speculation, reality says it isnt, and its time to face the music.

Its an interesting argument I hadnt heard before...not sure I buy it 100%, reality is probably somewhere in between speculation and what Krugman argues.

 

where are your experts now????

 

I believe that the most effective way to get the US to start on the road to a prudent self-reliant energy policy is for there to be a protracted increase in oil prices without there being significant shortages or rationing.

This will simultaneously maximize the pressure to finally do something about replacing oil, and minimize the adverse impact on society.

I regularly get over 55 mpg in my Prius. I have co-workers who drive pickups getting about 11 mpg. I'm not considering trading my Prius in on a truck, but they're considering getting rid of their trucks for a Prius. I've got to believe that this, repeated millions of times over many years will significantly decrease the consumption of gas.

I wish us all luck, though.

 

It is not necessary for speculators to hoard oil to affect the price. It's not necessary for them to ever see, touch, or own a drop of oil. All they have to do is bid up the futures contracts. Then, as long as Joe Pickup is willing to pay whatever it takes to fill his truck, and Mary Soccermom is willing to empty her purse to fill her SUV, the speculators can harvest their share of the public wallet.

However, I believe that concrete factors such as peak oil and increasing demand worldwide are very important in the price of oil.

But don't ignore market distortions.

 

Great prediction Reuters. I'll keep making my own investment decisions.

 

I don't know whether I should laugh or cry...

I'm afraid that at this point, my niece and nephew are going to think I'm nuts when I tell them stories about the buying gas for less than $5 a gallon. If I'm so bold as to mention that I remember buying my first tank of gas for less than $8 (for the fill-up) they'll think I've gone completely bonkers.

They won't know a world where gas prices start with a number lower than five. As someone pointed out, that's just supply and demand. Opec doesn't seem to think that demand is high enough to get them to increase production (not that I think this is a good solution, but it might temporarily lower prices.)

What I want to know is when is someone going to throw down the technological gauntlet like Kennedy did in the '60s and challenge us to do better. OK, I know it's not quite that simple, but we gotta start somewhere. If we keep finding reasons not to accept the challenge, we're going to wind up penniless and in the dust that someone else kicked up in their passing.

 

Bingo, we have a winner.

I would echo would you said here.

 

Fortunately (for him) Kennedy didn't have to contend with a credit card balance like what Mr. mentally below average has bequeathed to future generations of U.S. citizens.

Nothing like those multi-generational mortgages.

 

How about decline in the value of the $?

 

I have read the phrase "supply and demand" well over 100 times in this thread. And while I believe this is basically true, there is another force at work. The supply is being artificially manipulated thus keeping demand high, relative to demand. As long as that holds true all of the things we learned in Econ 101 just don't work.

It's all about the money, folks!

Bob

 

I dont like the 'supply is being manipulated' argument...mainly because most of our oil comes from domestic and canadian supplies. Its how we keep it cheap (and it IS cheap) compared to Europe and other parts of the world. OPEC may be controlling their production, but it isnt the entire picture. The weakening dollar and increased worldwide demand fit in too. I think the president uses this as his excuse to not really do anything ('there isnt an oil shortage, just supply manipulation! easy fix!')

But in the end I dont think it matters, I agree that the 'technological gauntlet' has to be thrown down. Im at MIT and I was working on an energy project last year through our 'Energy Initiative'. It struck me how much of our sponsorship money came from major oil companies....the NSF and DOE were putting up relatively little money, mainly because their budgets have been stagnant for many years while the government has dumped and wasted money elsewhere. The oil companies lobby congress and the president that the oil problem is just a supply side manipulation problem, that there is plenty out there, and they dont have to worry about it. Meanwhile, they invest in all the new energy technologies so they can own them once they are developed. Not the best research and development environment, in my opinion....Money has to come from somewhere besides the entrenched oil interests for real breakthroughs to occur.

 

"OPEC may be controlling their production, but it isn't the entire picture."

Absolutely! And I'm not just referring to OPEC. With the record profits being made I don't believe there is a lot of incentive for any of the oil producers (or anyone in the "top end" of the business) to allow a glut of oil to hit the market. Again, that is only one piece of the much larger puzzle.

Earlier this year it was widely reported that during one month (I forget which) there was a drop in demand for gasoline in the US of about 10%. It was also reported that US refineries cut production by about 10%, to match demand. That is what I refer to as "manipulated production" for the sake of keeping prices at their current levels.

Alternative energy is, for sure, the long term solution to the problem and it is going to cost a LOT of money. In the mean time, what do we do about the family who simply can't afford to go to doctor because of the cost of gas for the family car?

Thanks for your thoughts,
Bob