Oil Prices Decline
Crude oil prices dropped by $1/barrel and gasoline prices moved to an 8 week low following the news that BP would be keeping its pipeline open in Prudhoe Bay. While the pipeline will remain open production will be cut back by about half.
Other factors are the cease fire between Hezbollah and Israel, and Royal Dutch Shell begain pumping again in Nigeria through the pipeline that was damaged in July. Also we are nearing the end of traditional driving season which is also good news as demand will ease up as well.
Overall, it looks like a bullet was dodged in regards to oil prices pushing the U.S. and possibly the world economy into a recession. Although people like James Hamilton are predicting lower growth for the remainder of 2006.
In your opinion how much of these price fluctuations, at both the retail and wholesale level, are a result of true supply issues versus speculators reacting to every bit of bad news that comes along?
It seems like even the notion of a supply disruption will push prices higher before any real shortage occurs. Could we be seeing a market failure because of futures speculation?
No, I don’t think so. Right now the market is tight so even a minor disruption causes big changes.
Of course you know that the whole oil price thing is just a Rovian plot for the midterms.