Population Statistic: Read. React. Repeat.
Monday, October 16, 2021

After a summer’s worth of scary spiraling, gas prices are now in retreat, all the way back to a comfortable price point:

Pump prices are now 50 cents lower than a year ago and have plummeted by more than 80 cents a gallon since the start of August. The previous 2006 low for gasoline was set in the first week of January, when pump prices averaged $2.238

Gasoline can be found for less than $2 a gallon in many parts of the country. Tom Kloza, an analyst at the Oil Price Information Service in Wall, N.J., said Missouri is on course to become the first state with average prices below that psychological level.

The question is, why are the prices dropping? Conspiracy theories abound, but the reality sounds pretty familiar:

By late summer, hedge funds and other investors had poured billions into long positions in oil, gasoline, natural gas and the rest of what traders call the “energy complex,” all betting on a replay of the severe 2005 hurricane season that sent prices soaring in the wake of Katrina and Rita. But one day after oil reached a monthly high of $76.98 a barrel on Aug. 7, government meteorologists downgraded their hurricane forecast and cautioned that a repeat of 2005 was “unlikely.”

That announcement, combined with the end of the summer driving season and a recalibration of the Goldman Sachs commodity index that reduced the weighting of gasoline, prompted speculators to head for the exits even faster than they’d piled in…

“Whatever you want to call it - speculators, fast money, hot money - a big part of the drop in crude that we’ve seen this year is because of selling by hedge funds,” says Merrill Lynch technical analyst Mary Ann Bartels.

So, instead of acute shortages and geopolitical strife, the chief reason for the jack-up in pump prices this year was market manipulation. Pretty much what Sanford C. Bernstein analyst Ben Dell theorized back in August. Dell’s ideas were controversial back then, but in short order, they’ve pretty much been validated.

by Costa Tsiokos, Mon 10/16/2006 11:00:40 PM
Category: Politics, Business
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    Last year, analyst Ben Dell’s controversial assessment that oil prices were being artificially inflated via market speculation instead of supply shortages seemed to bear out when pump prices dropped toward the end of 2006.
    Since then, of course, …

    Trackback by Population Statistic — 12/17/2007 @ 10:44:51 PM

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