Now, we would hazard a guess that you might have been one who was blaming the president for higher gas prices.
After months of rapidly rising gasoline prices—despite any real justification for the dramatic increase—the pain at the pump appears to have peaked as the national average price for a gallon of gas has declined to about $3.92.
Gasoline prices rose by 34cents per gallon over the past six weeks, and the price ofdiesel rose by 20 cents.
Based on anecdotal evidence from the various regions of the country, most analysts agree that we have seen the top and are on the way down as some of the most expensive markets —like Los Angeles— have already experienced drops of between 12 cents to 20 cents a gallon.
The president’s decision was based on an analysis of current oil supply and the likely effect of further sanctions on prices.
Others are suggesting that easing of political tensions with Iran may be the reason—despite the fact that the Iranian threat had already been largely mooted once Saudi Arabia promised that it would take up any slack in oil deliveries caused by an Iranian eruption.
In the last five years, the United States and Canada combined have become the fastest growing sources of new oil supplies around the world, overtaking producers like Russia and Saudi Arabia.
Then there is the factor of the refineries that have been down for maintenance (as they typically are this time of year) coming back on line at a time where there is lots of oil supply around for the refineries to refine.
The oil speculators that falsely drove up the price of oil over the past few months —by as much as $20 a barrel—may have gotten the message that the Administration wasn’t going to sit idly by and let them mess up our recovery just so they could make more money.
What has been odd about what we have experienced was the precipitous rise during the time of the year when prices should have been lower.
In Part II of the series, we noted the profound impact the money managers were having on our pocketbooks through their speculative behavior—behavior that had resulted in non industry traders buying the equivalent of 372 million barrels of oil through a variety of futures contracts.
Domestic oil production, which had declined to 5 million barrels a day, is approaching 6 million barrels, and more appears to be on the way.
In making the point that these folks were the true villains behind the unnecessary rise in gasoline prices, we noted what Bloomberg had to say on the topic –Talk to oil analysts these days and chances are they’ll tell you that more than half the spike in the oil price is due to speculators—specifically noncommercial users.
Contacts noted thatcustomer concern over gas prices remains muted at this point,but they have seen more interest in smaller vehicles recently.
That’s jargon for investors who are buying up futures contracts not because they intend to use the oil, but because they think it’s a good investment.
These aren’t airlines or refining companies; these are money managers betting that the price will go up.
The United States has 5% of the worlds oil reserves yet we use over 20% of worlds oil.
A debate quickly ensued over whether this was an appropriate use of such reserves with the President’s critics suggesting that releasing oil reserves to lower prices was inappropriate as the reserves are for times of national crisis.
Now you can argue that by drilling more (never mind we are now producing much more oil than we were five years ago), we could lower our prices.
Appearing that week on the “Forbes on Fox” program, we suggested that the announcement was likely a bluff by the three nations to send a message to the oil speculators that these governments could cause the speculators to drop a lot of money should government flood the market with extra supplies of oil.
Shortly, thereafter, the price of oil began to come down and, to date, there has been no flow of oil from our strategic reserves.
Amy Unwin is a business journalist based in Sydney, Australia. Amy has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Amy spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.