$2 gas?

[sdrealtor]

I think this is wishfull thinking but gas prices are dropping rapidly.

http://www.usatoday.com/money/industries/energy/2006-08-29-gas-price-usat_x.htm

[vcguy_10]

Here’s the link.
A lot like real estate… as oil prices went up, many started to hoard it, even non-oil companies would buy to resell at a profit. This pushed prices even higher in the process, but now those specuvetors are trying to unload all that oil. It’s no surprise that prices had to peak and then drop.

[PerryChase]

I think that the oil traders are selling a recession on the horizon. recession = less demand for oil.

Unfortunately this won’t help real estate.

[Bugs]

I think we’re a lot more likely to see $4/gallon gas than $2/gallon gas.

[powayseller]

Ford just said they think oil will stay between $3 and $4, and I agree. This is a temporary blip.

Also, a courtesy request: put your URLs in links, and use the proper forum. This needs to into “economy and investing”.

[barnaby33]

Why bugs? I remember during the first gulf war when gas shot up to *gulp* 1.50 a gallon! Holy guano droppings batman that was alot. After the war people realized there was no shortage and the price promptly dropped.

I suspect that a fairly large percentage of the price increases in the last few years are not do to general consumption increases, but of hoarding. Yes, we are using more oil. Yes, we are fairly close to production capacity(worldwide). When we drop just a bit below that capacity though there will be a surplus of oil available and prices will fall back. The same thing that makes oil a global commodity on the upside makes it a global commodity on the downside. All it takes is some slack from us, some slack from the Chinese, some slack from Europe. A recession would probably provide that slack.

Josh

[capeman]

It is kind of amusing to me to see that everyone acknowledges that a lowering of gas prices is the equivalent of a “tax cut to increase spending”. At the same time nobody is making the association of when gas prices tend to go down and what the real reason may be. If you take a look at this CNN article…

http://money.cnn.com/2006/08/30/news/economy/gas_prices/index.htm

they are pegging the trough in prices at around Thanksgiving right? That happens to be the start of the largest commercial holiday season when consumer spending is essential to economic growth. What a coincidence. Didn’t gas prices make a similar and unexplained decline during Nov/Dec. last year not long after Katrina supposedly greatly helped them increase? (Right, and how many refineries were really taken out by that?)

An interesting tint to this year is that prices seem to be beginning their expected decline right before midterm elections? Another coincidence? What about the fact that the current administration created the largest increase in oil dependence since the 60s by allowing everyone and his brother to write off gas guzzling SUVS essentially promoting them over all other automobiles. It kind of makes the gas prices seem more like a seeded economic buffer to a future expected decline in economic growth. If 2005 was the overall peak of the housing bubble and the home builders knew it by insider selling and the government knew it and promoted energy market manipulation then overall pricing metrics could have been planned. That allows the obvious bed-buddies (oil companies) to the administration to charge pretty much what they pleased while never crossing a hypothetical threshold of a gas price that would be fatal to the economy ($4 hypothetically). In return spending and growth is buffered while everyone’s big ticket ATM (home equity) and discretionary spending is starting to dry up. In order for folks to get to work from the distant burbs (the only place they could afford a home) they NEED to fill the guzzlers they bought causing gas to be 10% of all consumer spending for the last half year. At the same time the bed-buddies post the largest revenues for any corporations in the history of the world!

I’m not really anti-establishment but I do think if this theory is correct that I am very impressed with how it all works. Market manipulation, seeding ulta-mass-consumption, kicking back to the friends of the family (oil companies) and the overall perfect timing of all three could very well see the economy decline subtly and smoothly to next year before the expected BIG drop. That’s post essential commercial holiday and midterm election and some brilliant economics at work if it is the case.

There is a short quote in this CNN article by an analyst who says plainly…

“The levels that were in place were never justified to begin with,” said Mark Gilman, an analyst with The Benchmark Co. “This is a bit of a return to reality.”

Sounds like another market I’ve heard a lot about lately…

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