Oil price decline

One thing to bear in mind about oil prices right now is that their decline has to do with more than just supply and demand. Part of it's the consequences of speculation. Speculators don't intend to take delivery of the oil they're buying contracts for. They plan on selling those contracts to someone else before they have to take delivery. They've no arrangements or facilities for actually accepting delivery of the oil if it ever reaches it's destination while they own the contracts. And the costs of parking a supertanker while you wait for a buyer are ruinous. Ports and shipping companies don't like having anchorage space and ships tied up idle, so they punish those who leave ships just sitting there doing nothing. All of which means that, as speculators near the delivery date on their contracts, they have to sell. At any price. Even if it means selling at a loss, because the alternative is an even bigger loss that just might wipe them out completely. That's causing prices to go down further than they otherwise would, as all the speculators get squeezed. Once the speculators are out of the market, expect the price of oil and gas to rebound somewhat.

Gas prices, retail season

Gas is $1.83/gallon at the Arco this weekend. Apparently I was wrong about where it'd stabilize. It's been a long while since it's been under $2/gallon. It briefly dipped this low in early 2005, but the last time it was consistently this low was early 2004. Looking at oil futures, it doesn't look like there'll be upwards pressure any time soon, either. They lose traction every time they get above $55/barrel, mainly because demand just isn't there.

Black Friday I suspect has become black-and-blue Friday for retailers. The crowds appear to have been there, but not as much as expected and they're doing as much looking as buying. There's been no crowing from retailers and analysts yet, my guess is that sales weren't just below last year they were below even this year's pessimistic expectations. That's bad news seeing as how discounts were even deeper than last year. People just don't have the money to spend.

Gas prices

$2.27/gallon at Arco this morning. Which is just about at my magic point of $2.25/gallon, the price at which we've seen a 50% drop since the high point this summer. I figure the price will start to stabilize around here. It's really nice to see a fill-up under $30, but I don't expect it to go too much lower.

Gas prices continue to fall

Today gas at the Valero near me was $2.47/gallon. I had a bigger-than-usual fill-up, the needle was all the way down to E (I normally fill up with about 1/8th left), yet the total on the pump when I was done was just shy of $28. I haven't seen a fill-up below $30 in a long long time. The Arco station's probably several cents cheaper.

Note to self: convince Dean to hit the Valero up near me instead of the stations in Mission Valley. I'm seeing about a 25 cent difference in prices.

Gas prices

Arco's down to $2.71/gallon this morning. At this rate we'll be down under $2.25/gallon, a 50% drop from the peak price in mid-June, before Thanksgiving. This is making a big difference in my gas bill. The Focus gets good mileage, but I was still putting $50 or so into it every week in June. Now my weekly fill-up's down to less than $35. That's $60 a month more in the budget. OK, for me that's not a big amount, but for people getting by on less than $40K that $60 is probably 50% of their free money every month and makes a huge difference.

Gas prices

Correction: $3.03/gallon tonight at Arco. We're fast closing on a 1/3rd drop from what gas was at just 3 months ago.

Gas prices

The Arco station's down to $3.09/gallon today. That's a 20-cent drop in a week. Pretty steep there.

I don't think the threatened OPEC production cuts will reverse the decline either. Gasoline demand in the US is down 6.4% over a year ago, and world-wide it's slowing as well. Inventory levels are rising, indicating supply currently exceeds demand. OPEC's dream of $100+/barrel oil is just that, a dream. The world right now can't afford that price, and at that level it becomes economically viable to use alternatives. And quite frankly that price level was never set by market forces, it was set purely by speculators who're currently in the process of losing their shirts, pants, socks and underwear and absent another speculation bubble prices aren't going to go that high again for quite a while. The only way OPEC could drive prices that high again is to curtail production so severely (say in the 25% range) their members wouldn't honor the cuts. Prices went too high too fast and stayed there for too long, people have changed their behavior (abandoning SUVs for smaller more fuel-efficient cars, finding ways to not drive, etc.) and even as gas and oil prices fall the housing implosion and credit crunch are sending the economy into the toilet making people twitchy about spending money and keeping them from returning to previous expensive habits. It's going to take years for natural growth to offset the effects of those changes. Sorry, oil guys, but in your quest for a short-term windfall you screwed your profits over the long term.

Gas prices

Gas is down to $3.25-29 at stations near me. That's a big drop from the $4.50+ prices back in June. A 30% or more drop in 3 months is pretty steep. And demand's down and staying down, which is causing the oil producers and oil companies and commodities speculators to throw fits.

Gas prices

Gas prices here are down to $3.37 and dropping. Not suprising considering the news on oil and gasoline supplies. Crude oil supplies are up 8.1 million barrels this week, making 2 consecutive weeks of increased supply. And the increase is 4 times the 2.2 million barrel increase predicted. Gasoline inventories are similarly up 7.2 million barrels, nearly 5 times the 1.5 million barrel prediction.

The oil industry's getting bit hard. They figured they could keep increasing prices indefinitely with no consequences. Wrong. When gas crossed the $4/gallon figure, people changed their behavior. If they were looking for a car, they stopped looking at big SUVs and pick-ups and started looking at more fuel-efficient, smaller models. If they had a gas-guzzler, if they could afford it they dumped it in favor of something that wouldn't eat their pocketbooks. Across the board they stopped driving as much, trying to cut down on how much gas they had to buy every week. And it went on long enough that these changes are permanent. Demand for gasoline won't be increasing as prices decline, not until the population grows enough to offset the decline in per-capita use. I'd note we've seen this before, back during the gas crisis of the 1970s. Prices climbed so far so fast that people dumped their big American gas-guzzlers for Japanese compacts, and demand dropped and stayed down for years until population growth caught things up. So anybody who's making projections based on last year's demand? Your input's garbage, expect your output to be garbage too.

Gas prices

Gas is down to $3.79 at the Valero I normally fuel up at. That's a 60 cent drop, nearly 15%, over the last 6 weeks.