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Kyle Busch
Automotive ExaminerKyle is an auto enthusiast and consumer advocate with over 30 years of experience. Author of “Drive the Best for the Price…” He welcomes your comments and car questions on his website www.DriveTheBestBook.com . Kyle’s car has over 490,000 miles and he even has the same name as the #18 NASCAR driver.
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Gas prices stall then fall?
1 comment
by Kyle Busch, Automotive Examiner
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Will gas prices fall? It is speculation!
In 2004 FIR was first launching and oil was at $29 a barrel. The publication predicted that oil would hit $60-$70 per barrel in 18 months, and it did! At that time, the newsletter said that real inflation was picking up and the value of the dollar was going down. This was blamed for the increase in the price of oil. Now, however, FIR suggests that the price of oil has been highly influenced by speculators.
FIR calculated that as the dollar declined by 40% in the past seven years, oil prices would be expected to double. However, oil increased by almost 400% in the last few years and it is up almost 700% in the last decade. This helps to support the speculative argument.
FIR believes that hedge funds have also pumped up the price of oil. The newsletter says that as recent as 10 years ago, the commodities market involved actual buyers of oil. Today, however,
many “average Joe” investors have commodity accounts and they are playing the commodity
futures market like a casino.
To support this claim, FIR says that since 2003, the number of open futures and options contracts
on West Texas Intermediate Crude increased by 800%, but the global demand for real physical
oil increased by 8 percent.
Tim Evens, is an energy futures analyst at Citigroup’s Futures Perspectives. He states, “We are
seeing investment flows into the oil market that don’t have anything to do with the demand and
supply of oil.”
When the pros decide to get out of oil for a time, everyone will likely run for the exits, and the
“average investor” is likely to get hammered. It looks like this may in fact be ready to happen!
What does all of this “speculation” have to do with autos and driving? Well, a number of people
have been writing to me about immediately getting into smaller fuel-efficient vehicles. I realize
that it is hard to put up with high gas prices. However, I suggest that drivers try to remain reasonably
calm.
It is a good time to identify a more fuel-efficient vehicle that will meet your transportation needs,
read some road tests on such vehicles at your local public library, and test-drive cars, etc. Then,
when gas prices fall, you will be in a better position to make good deal and hopefully avoid getting
hammered on the vehicle you want to trade or sell.
Kyle Busch has an undergraduate degree in economics. He is the author of “Drive the Best
for the Price…” He welcomes your comments or car questions at his auto web site:
Topics: Gas prices , speculators , speculation , speculating
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