For weeks now we have had screaming headlines in the main stream media about oil prices. Every day its "Oil hits a new high" or "$200 a barrel in sight" or whatever. I’ll let you in on a little secret — In the past two weeks the price of oil has dropped over $23 a barrel. Of course if you didn’t happen to be reading page seven of the financial press, you would never have known.
Yep – two weeks ago oil hit a high of $147 and traded today at $124 and change. Wow…This is really big and good news for those of us who make their living from ancillary industries built on the price of oil. But, we haven’t heard much about it. I guess that the MSM thinks its probably an aberration… and oil will skyrocket again so why mention that its down only to have to say its up in a few days.
What this reflects is a couple of things. First, probably about $50 of the price of a barrel of oil is psychological. Its driven up by traders who react daily to a storm, revolution, strike, or a circuit breaker that shut down a pump in Nigeria. In this case, the fact that President Bush used his bully pulpit and OKed offshore drilling reflecting the US’s mood of "drill drill drill" and start turning our vast energy reserves into something we can use in our gas tanks blew those traders out of the water. Of course there were other things, like banks who owned futures selling them because they needed the money, but you can’t rule out the psychological effects.
Oh, the price of gasoline has stopped its charge to $5 and is down across the country in the past week as much at eight cents a gallon. (Fifteen cents in Ohio). So what has happened? First of all, the MSM hasn’t noticed. Second, all the yelling and chest beating about high gas prices has got people thinking a bit about their driving and guess what, the demand is down, supply up and prices down. AH, the glorious free market in action. My numbers are from the Department of energy and are valid as of the 21st. What do you want to bet they will be down a lot more on the next report coming out on Monday.
For those of you who live in California, I suggest you move to virtually anywhere else except Washington state. You are paying about forty cents a gallon more for gasoline, mostly due to the wisdom of your legislature and governor.
You can check the DOE report here. As you read it, remove your hat or put your hand over your heart and think of our fearless reporter in the UK who is paying $10 a gallon to fill his Mini this week. (The price in Australia is about a buck and a quarter a gallon more than in the US.)
Obviously good news isn’t important (heard anything about Iraq, except Obama’s visit lately) but bad news gets the headlines — If it bleeds, it leads. Rest assured that gas and oil prices will be down by 25% and no one will be talking about it. Sigh…
JVH
One Response
Its not a Mini, it is a big engined (for the UK) 2.5 litre V6 turbo diesel; but it does do over 50 mpg on the freeway. Fuel has already started to drop here as well, coming down by up to 5p a litre or about 4% (you can do the maths to convert this to dollars per US Gallon) in the last 24 hours.