8-6-08 by dugan
The drop in the price of oil, now at under $119, feels like a fever breaking. Iran’s saber-rattling, Nigerian gangs, Chinese demand, the weak dollar — all still exist, but as the sweat cools they are no longer "reasons" for crude oil to reach $145 a barrel. Today’s surprise report of falling gasoline supplies in the U.S., which would have jacked up the market a few weeks ago, went by with a yawn.
Too bad, of course, that the fever emptied drivers’ wallets and crippled whole industries, including air travel — while regulators and oil’s friends in the White House sat on their hands, allowing hedge funds and oil companies to reap the benefit of ordinary consumers’ loss.
The next few days will decide whether the profiteers have had enough (something that "Insider" predicted last week). From the AP story:
Oil market traders are paying close attention to see if oil falls
below $117, a key resistance level expected to trigger a rash of
technical selling by computers programmed to dump oil contracts once
prices fall below a certain threshold."There’s a line in the
sand just below $117. If you close below that, it signals traders are
giving up on the bull market in oil," said Tom Kloza, publisher and
chief oil analyst of the Oil Price Information Service in Wall, N.J.
"Subsequent rallies may take us higher, but the highs for the year have
probably been put in."
Which raises the question: Those computers in the offices of investors were also programmed to buy when the oil market hit a certain price going up. A flood of buy orders pushed the market ever higher for a year, just as a flood of sell orders will push it lower. What is the economic rationale for allowing one poorly regulated commodity to trash a whole economy?
All the more reason to skim off some of those oil profits and use them for the solar power, windmills, renewable fuels and gas-sipping cars that would spare us the next oil fever.