What's Made the Price of Oil Take a Swan Dive?

It all seems so quaint and distant now, that debate about the cause of sharply rising oil prices during the first half of this year. When homes and jobs and the whole damn economy seems at stake, the pump has stopped, at least in the media's focus, appearing to be such a threatening object.

And looky here: while most of us have had our attention elsewhere, on pigs and lipstick and Bill Ayers, the price of oil has plummeted from its earlier mid-year high. Just the psychological effect of all those "Drill, baby, drill" chants must have forced it down.

Or it could be that a weakening economy produced falling demand. Or even that, just as the price rose in close coordination with a drop in the value of the dollar, the price has fallen as the dollar has regained value (since world oil transactions are valued in dollars).

But that would mean that all the nostrums for changing the equation on the production side--measures that would, most experts agree, take years to have any effect, have far less power to change oil prices quickly than reduction in demand for gasoline and other petroleum products. And that would mean conservation, far from being, as Dick Cheney once ridiculed it, just "a sign of personal virtue," would be the most immediately effective way of dealing with -- what's that cliche again? -- pain at the pump.

Comments

[PT6]

With illegal 30 to 1 leveraging or even higher by Wall Street Speculators CRUDE OIL climbed to $147!

At the PEAK of DRIVING SEASON on June 23, Congress began an INVESTIGATION into the illegal use of LEVERAGING!

Crude Price Dropped 24% in one month and just KEPT on sliding by almost 60% recently!

So it was WALL STREET Corruption that drove up the PRICE and caused $5 diesel Fuel this summer!

And it was Fear of Congress after Speculators that stopped the Leveraging and caused OIL to TANK!

[lapdogs]

Little Demand vs Gluten Supply.

OR

Few Jobs vs Gluten Unemployment.

[greatblue]

Meanwhile, Virginia Senate candidate Jim Gilmore discovers oil at the Jiffy Lube.

http://vagreatblueheron.wordpress.com/2008/10/12/gilmore-drill-here-drill-now/

[DaOne]

It's called deleveraging......oil & gold get belted when the US dollar rallies.

[fistbump]

Deleveraging... as in margin calls and selling assets in a scramble for cash.

[TruthAndConsequences]

My brilliant wife said back in *May* that we should all wait until October to take our vacations, when gas would drop below $3.50 a gallon, and she was right. Does anyone remember how convenient it was that gas prices just happened to dip below $2 a gallon before the midterm elections two years ago, but then they resumed rising immediately afterward?

And why is it that despite gas and crude oil prices dropping now, we've heard warnings that heating oil will be more expensive than last year? Is that because the election is in November, not February?

I call bullshit on these things just being coincidental. All the usual excuses that the media repeat without question for gas prices are suddenly no longer operative? No oil price spikes during the hurricanes that went right up the Gulf? That was downright astonishing. But we are always told oil prices spike even ahead of a hurricane's impact because of the threat to Gulf oil platforms. So why not this season? That's just total unequivocal bullshit in an election year!

[leoeris]

Winner. You get the prize.

[girlwild]

The Republicans always drop the price of oil right before the election.

[valhalladad]

You are exactly right. Have we such short memories that no one can remember the 'wild' speculation that gas might get to $3.00 a gallon in 2006? Yet miraculously it came down only to go right back up after the election to heights we couldn't imagine. Then as now, there is no external easily identifiable reason for these price swings other than the extreme anger at the 'oil' men including Bush/Cheney and by proxy, McCain. This time though, they didn't count on the other financial mess cropping up so suddenly. The only thing that can help McCain at this point is an international crisis probably on November 1st. Are you listening Iran?

[research]

Unregulated Speculation via the Enron Loophole caused the recent doubling of the price of oil.

[Cowfeed]

Oh,,,, What a mystery. Da ya think that maybe the greedy oil barons of the world just might have twigged into the realization that after squeezing every dollar out of the economy and spiralling the world into a severe economic crisis that maybe us common folk have just had enough and are ready to do what ever it takes to take control of the peoples natural resources? They are just giving us a breather to take off a little heat before doing the same thing again. Trouble is government will not fix it cuz their feeding out of the same trough. Brace yourself ....they are just getting ready for the next round.

[AynRand123]

Very interesting question. Yes, demand for oil is down, but given that the price per barrel is now almost 50% off its peak, it's hard to believe that there aren't larger forces at work here. Certainly, the demand for oil is not half of what it was just a few short months ago. People also give too much credit to individual driving choices when it comes to impacts on the price of oil. Two thirds of the demand comes from industry (buses, trains, planes, trucking, industrial plants, etc.). "Conserving" there means you're losing jobs because of declining production -- that kind of conservation we can do without.

[leoeris]

I am selling John Galt crucifixes on ebay if you are interested. 30 pieces of silver. Won't accept gold.

[TooLooseLeTrek]

I've noticed that for the past few presidential elections, during which time the price of gas has sky-rocketed, the price of gas at the pump drops just a few montsh before the election, and goes up shortly after the Republicans have stolen that election.

[pjburns11]

IT is all a scam - they fix it wherever they want it knowing we will complain but pay.

Just like the bailout - Bush's final act for his puppet masters. A 1 TRILLION dollar heist. Right under our noses as we hold the door for them.

www.thetruthburns.wordpress.com

[TimmySlagle]

If you've been watching the prices, they peaked at $147 right before the President lifted the moratorium on offshore drilling. It's been downhill ever since.

When Congress let the moratorium expire it was around $110. After that it plunged.

To those of us who have been chanting "Drill Baby Drill" this is no surprise. I've been predicting it here on the pages of HuffPo for quite sometime. http://www.huffingtonpost.com/2008/09/24/democrats-let-offshore-dr_n_128839.html?show_comment_id=161120733)

Since oil prices are based on futures speculation, the offshore oil doesn't have to be on the market, to affect the price.

[twgbonehead]

I think it was due to the Mars Rover-that-doesn't-rove. Presence of the Ice Cap indicates the possibility that there once was life there, and if so, that there's the possibility of a tremendous amount of oil at Mars's core.

The possibility of all this extra petroleum, only a stone's throw across the galaxy drove expectations down. Of course it's not available now, but because it's there for the future, if we need it.

By the way, "Om Mane Padme Om" is a much more spiritually satisfying mantra than "Drill baby drill", but you can chant whatever you want. I'd suggest some Bayonne-scented incense to go with it, though.

[KillTheMessenger]

Good one! Perfect reply.

:-)

[olephart]

Let's see, if they drill for oil, find it, develop it and bring it to market in 5 to 10 years that's makes all those speculators holding the November 2008 contracts want to sell. That's like the man tossing paper on the freeway and when the policeman asks what he's doing he says I'm keeping the elephants off of the freeway. When the policeman informs him that there are no elephants on the freeway the man responds "see, it works". You’ve dazzled us with brilliance again Timmy.

[TimmySlagle]

OPEC doesn't want US domestic production. In the past OPEC has increased supply to drop the price and thwart US projects like shale oil and coal liquification.

Speculators believe OPEC is going to do it again.

I understand that you all have a lot at stake with your predictions of : "it won't affect prices for years." So I don't expect you to listen to reason.

At least I'm offering an explanation.

[montemalone]

It's $90/bbl.
Now we're supposed to think it's cheap.
I guess compared to $150/bbl it is.
Meanwhile, profit continues to flow to producers and dealers.
Do you think GM Ford are planning some new suvs?

[KillTheMessenger]

It's even cheap at $150/barrel. A barrel of oil happens to equal the energy contained in the manual labor of a man for a whole year. You are buying the equivalent of a couple of months worth of backbreaking labor every time you fill up the tank.

So I guess it's pretty hard to imagine why you are complaining so much. Maybe you just don't know how good you have it?

[JohnBarleycorn]

Avg. cost of production for one barrel of oil: $10.00 USD.

[vietveter]

Do you want fries with

that WHOPPER?

[watchingduck]

Maybe the price of oil is dropping because we are now within 30 days of an election, the results of which will dictate whether or not the oil barrons have free run of Washinton like they have for the last 7 1/2 years. They are doing everything they can to influence this election. They are spending millions. Why not drop the price of gas temporarily, if you might gain 4 to 8 more years of fun?

[CFAmick]

"Or even that, just as the price rose in close coordination with a drop in the value of the dollar, the price has fallen as the dollar has regained value (since world oil transactions are valued in dollars)."

Most likely.

I'd also like to see hwo low they drop on Nov. 3rd, as well.