Skeptical About Oil Prices!

Who cannot be happy about the current trend in falling gas and heating oil prices? And yet, as I pull up to the pump and fill my tank for $2.21/gallon, that’s in Mid-coast Maine, I cannot help but be skeptical about my reduced out of pocket expenses.

Anyone familiar with the Northeast knows that this region relies heavily upon heating oil. You should also be familiar with the fact that every August/September, prices for heating begins to rise. The normal excuse is insufficient inventories, some world crisis or that The Farmer’s Almanac predicts a harsh winter. We are also familiar with the annual jump in gasoline prices that occur in June and again in September, just in time to gouge vacationers.

When crude hit its peak of around $78.50 per barrel in July and gasoline topped $3.00, the oil industry offered all kinds of reasons for these outrageous prices. We had the issues of Iraq, rising tensions in Afghanistan, Venezuela trashing the U.S., BP’s broken pipeline in Alaska and numerous other nebulous reasons.

What has changed? Why is the price of crude in the low $60’s? Are things looking up in Iraq and Afghanistan? Is Chavez backing of his criticism of the U.S. Has China slowed its search for oil? Is the pipeline in Alaska fixed? Why is the wholesale cost of natural gas half what it was last January?

Why do I seem to be complaining? Because I think we are being set up for a big fall. What event will occur in another month that may be having an effect on prices? Could it be the elections in November? What major shopping event is fast approaching that for many, accounts for over 50% of annual sales? Could it be Christmas? I live only about 25 minutes from many Maine coastal communities. In talking to shopkeepers, they were all complaining about sagging sales. While the government likes to tell us that the economy is strong, I think they must have checked there numbers. Businesses are hurting and these people like to complain. With all of the problems President Bush is having with his ‘non-foreign policy,’ what are the chances of a strong Republican showing in November? It is a lot harder to win elections with gasoline over $3.00/gallon. And lo and behold, even before Labor Day, the prices begin to drop. Spending less on gas and heating oil we can now also begin to spending top dollars this coming holiday.

Well, if I were you, I would not roll out that check book or wrack up a lot of credit card debt. There is no logical or physical reason for prices to be dropping this fast. Prices that tend to be driven by corporate greed are very fickle and subject to political pressure. Oh, did I mention slackened U.S. car and truck sales? Maybe those gas guzzling vehicles will get off the lots if people ‘think’ prices will stay low.