[Assam] Roller Coaster at the Pump
dilipdeka at yahoo.com
Sun Oct 8 13:55:51 EDT 2006
More on the conspiracy theory in the retreat of oil and gasoline prices. This time it is an editorial from the New York Times. The editor debunks the conspiracy theory and says it is as simple as supply and demand. He adds speculation to the equation. Now that the Guru has spoken, it is time for the liberal Xisyos to send out the apology letters.
P.S. I am enjoying the $2.05 per gallon price in Houston while it lasts. Who knows - it may go back to $3.05 after the November election? :-)
The NYT Editorial
Roller Coaster at the Pump Published: October 8, 2006 It seems a little too convenient. As the stretch run to the midterm Congressional election approaches, gasoline prices fall precipitously. The sudden shifts in prices seem to come out of the blue. And unlike copper or pork bellies, oil is a commodity always charged with political significance.
It only sets the bloggers typing faster and the pundits chattering louder when a key player in the price swing is the investment bank Goldman Sachs, whose chief executive, Henry Paulson, left to become President Bushs Treasury secretary. The suspicions were serious enough that the White House press secretary, Tony Snow, addressed them. He joked that it would take the kind of magisterial clout unknown to any other human being to rig gas prices. But with 42 percent of respondents to a Gallup poll saying that they believed the Bush administration was manipulating prices ahead of the election, it is probably not a laughing matter behind closed doors at the White House.
Mr. Snow is actually right no one can control the 85-million-barrel-a-day global market in petroleum products. But consumers gut feeling that something is not right with the gasoline market is a recognition of fundamental changes in supply and demand that have made prices more volatile and attracted ever more speculation. Average Americans find themselves at the whim of an increasingly capricious market, one that strikes hard in the pocketbook. And it might become worse.
Our demand for petroleum products strains the limits of the global capacity to supply them. In past decades, if a pipeline broke in Nigeria, Saudi Arabia might compensate by setting workers to pumping more oil. Now, with little additional capacity, rising prices are necessary to balance out supply and demand. Each bump can feel like an earthquake. But to speculators, volatility means the potential for big profits, so hedge funds and investment banks pile in to make bets, bidding oil futures up to unnatural highs and making the market even more unstable.
Summer is usually a time when prices go up; as families climb into minivans for vacations, demand increases. Predictions of another dire hurricane season this summer had the speculators salivating as they envisioned big storms headed for those oil rigs and refineries along the Gulf Coast. When the hurricanes failed to materialize and the driving season came to an unimpressive ending, the shouts of Buy! turned to cries of Sell!
Consumers may be relieved to find that prices at the gas pump plunged as a result, but unfortunately they could very well be in for more volatility and new price spikes down the road. As long as the demand for oil and gasoline grows faster than the ability to produce and refine them, the slightest shocks to supply will keep sending prices rocketing higher. The only way to get a stable market back is to cut back consumption, through greater efficiency and alternative fuels.
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