Then demand dropped too far -- the high price of gas, as well as the generally failing weak economy -- and with the drop in demand, the price at the pump fell back. Good news for drivers, good news for the price of produce and any other goods that get transported (which is, well, everything these days). Gas has dropped so low that Massachusetts is floating a proposal for the highest gasoline tax in the country, $0.52 a gallon.
Well, you'll be delighted (or horrified) to know that cheap gas may once again be a thing of the past. Couple weeks ago, the IHT reported:
From the Indian Ocean to the Gulf of Mexico, giant supertankers brimming with oil are resting at anchor or slowly tracing racetrack patterns at sea, heading nowhere. The ships are marking time, serving as floating oil-storage tanks. The companies and countries leasing them for that purpose have made a simple calculation: The price of oil has fallen so far that it is due for a rise.What a vision! Giant oil tankers, filled with crude, tracing figure eights in the Indian Ocean. Behemoths of the sea, half a million metric tons, floating giants -- and floating bombs and environmental disasters waiting to happen. Bloody boring for the folks working aboard, except if they explode, run ashore, or get taken by pirates. Be even more impressive if they'd finally build those sail-powered oil tankers -- but even the ordinary tankers have fanboys:
Some producing countries are trying to force that rise by using the tankers to withhold oil from the market, while traders are trying to profit by buying oil now to store and sell at a higher price later. Oil storage has become so popular that onshore tank capacity is becoming scarce.
Higher gas prices? Good for us? Terrible news for a weak economy? Great news for new, green jobs?
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Although some think that oil prices will rise from their current price of $40 a barrel to $200 this year, an IHS Director predicted that they would average $43 this year, while members of OPEC would be happy if it got up into the $60 - $70 range. Normally the miles driven in the United States is at its lowest right about now, and starts to rise until some time in May, when we hit the summer driving season. We will see if there is such a rise in consumption over the next month, since it will suggest how price is going to go.
ReplyDeleteWait a minute! You mean the price of oil isn't set by some fat guys smoking cigars in a back room at Exxon? It isn't set by some wise, benevolent Oil Czar in DC? Or some squillionaire sheik in Saudi Arabia? How exactly does the price of oil change without fat cats, bureaucrats, or plutocrats to manipulate the price?
ReplyDeleteIt is like there is some, well, invisible hand guiding the price, moving the price down when people use less and crude is plentiful, and moving it higher when people use more or supplies tighten. Who knew?
Gentle Cough:
ReplyDeleteI did expand on my original comment here, over on my own blog but the price of oil is set in a number of different ways. Some is sold under long term contract, some has been seen as an investment through the futures market, and some is sold at the last minute when someone suddenly discovers that they need another tanker-full.
The price of oil is set one way; a willing seller and a willing buyer agree on a price. That price may differ if the oil is sold under a longterm contract, as a futures contract, or if it is sold for immediate delivery, but if the buyer and seller can't agree on price, no sale. I think we agree completely on this, and that's all I'm saying.
ReplyDeleteI'm completely in favor of moving from oil to electricity as fast as possible. We can generate electricity without sending a squillion dollars a year to unstable thugocracies that hate our guts. Nukes solve the CO2 "problem" (in case you are worried about that) and keeping a good part of the squillions here would be a nice bonus. This is where Congress could spend money to good effect and make almost everyone happy, but I'm not sure there is enough immediate graft to get Pelosi, Reid, and Obama interested.