Oil Prices Plunge to Below $70 per Barrel
 

Image: Svadilfari But what about gas prices? Today the NYTimes reports that oil prices have fallen below the $70 mark for the first time in 16 months. With the markets spiraling downwards, I doubt that many people have looked at the price of oil recently, but it has been on a steady slide since it reached [...]

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While consumers routinely see a drop in the price of gas at the pump when the price of a barrel of gas drops (as we have seen in massive swings up and down over the past year) the actual price for a gallon of gas is more effected by OPEC and how they handle their business. When OPEC decides there will be a dip in long-term demand for fuel they hold a big emergency meeting (like they scheduled today to take place next week) and they "speculate" as to if they should slow production, cut exploration spending, etc., etc., etc.

A slowing in consumer purchase of gas at the pump effects the long-term forecasts for OPEC which in-turn effects the amount of oil OPEC decides to produce over a specific time period. This is most commonly related to economic issues (like the one currently taking place).

Recent reports from OPEC suggest cutting production by as much as 1 million barrels a day. How does this effect consumers?...eventually the dip in fuel purchases (or over-supply) is negated and all of the sudden (magically) there is an under-supply. Once again, the cycle continues and long-term energy investors and OPEC see an upswing (growing more confident) and the price of gas goes back up (again...magically). We are not in an age where crude is going to "run-out" of supply (not yet) so until that time...OPEC runs the roost.

Until the current "world" economic crisis is righted we can expect to see this same yo-yo effect of gas prices. The current $3-3.50 a gallon price for gas is something we should be thankful for right now because it will not last given OPEC's "emergency meeting" being held next week. For a governing body that controls 40% of oil production in the world...they set the prices.

Its a futures market traded 3 months in advance. The price of crude oil today reflects the price of gasoline 3 months from now, not today.

tjts1,

Granted it is a futures market, however, if we revisit this thread 3 months from now (or had the same conversation 3 months ago, do you believe gas prices accurately reflect what oil was at per barrel. And, if today's $70 a barrel price drops to $40 a barrel 3 months from now do you believe gas prices will reflect that regardless of what OPEC decides at their "emergency meeting?"

How do you explain going to bed with gas at $4.00 a gallon a month ago and waking up to $3.90 a gallon the next day? 3 months ago to the day did the price of oil a gallon rapidly increase overnight?

I'm not trying to be a wise-guy...making my point from my previous post that OPEC can drastically effect gas prices at the pump with quick decisions regardless of what a barrel of crude cost 3 months ago. The cost of a barrel of crude is only 1 piece of the puzzle.

... and OPEC isn't to blame either.

Outlaw speculation on necessities like crude oil and you'll never see a huge price jump again. I'm no friend of OPEC but it's our own so called "free-market" that allows this.

BUT, the quoted statement isn't exactly true either. If the price of crude goes up today, your going to see an increase in fuel prices TODAY as well. When the three month marker rolls around we wont even remember what it cost today, let alone see a decrease in prices.

Maybe I'm just into conspiracy theories, but isn't most of the refining capacity in north america controlled by only a few companies? So them setting the price arbitrarily isn't much of a stretch for me. Prices here move by 5% now overnight based on nothing really. I think they play with the prices to maximize profits without raising such an uproar that the public will call for some sort of regulation of prices.
Really, I think energy usage isn't really a good fit for totally free markets, people can't change their source or consumption easily enough for the supply demand model to work. Then you add virtual monopolies and we get strange pricing...
Ian

Well, here in refinery central, gas is ~$2.80ish a gallon today. I just hope it stays down till next week when I have to fill up again. The price of gas will go up, and it'll stay up overall no matter how much yo-yoing it does. It'd be nice to fill up my tank for 1 hour's work again (back in high school with $.80/gal) but I don't think that's going to happen any time soon.

The price of oil is due to a combination of lots of things including the speculation, OPEC production monkeying, and standard supply/demand. The best thing would be to get off fossil fuel all-together; but that's still a ways to come.

I try hard not to be a conspiracy theorist, but gas prices sure seem to fit that bill sometimes....$ per barrel increases-immediate mark up at pump....$ per barrel falls-VERY slow mark down at pump. No, I don't have any hardcore figures to back this up, just general observations.

BTW, I've often wondered is there a website anywhere that would have this kind of info on it....you know average price per gallon on any given day and also the cost for a barrel of oil on that day. Maybe it could be tracked better to see any possible relations.

Ive seen 2.59 personally, and heard of 2.45 on the news.


Thats cool I guess.