Traders having made their bundle, oil drops 9% in 4 days, dollar rebounds a little

[Grace62]

lower gasoline prices to follow...

http://www.bloomberg.com/news/2011-05-05...limbs.html

[GGD]

Grace62 wrote:
lower gasoline prices to follow...

It seems that the price at the pump only quickly follows the price of oil on the way up. We'll have to see how long it take for gas to drop 9%.

[Grace62]

Gasoline prices historically do track crude, but there's also seasonality and demand in play. The effect of season on the relationship between gasoline prices and crude is hilariously called the "crack ratio..." So with history as a guide we should be in for lower prices in the coming weeks.

[Acer]

Well, shucks. I was hoping prices would stay up so all the riffraff would be off the road for my vacation this summer.

[cbelt3]

Important note.. oil prices track the DOLLAR.

Yes, we're off the 'gold standard'. The world is on the 'oil standard'.

Think about it.

[vision63]

Acer wrote:
Well, shucks. I was hoping prices would stay up so all the riffraff would be off the road for my vacation this summer.

Hey! You're talking to riff raff here! I'll be right in front of ya doin' 45 in the fast lane.

[wave rider]

I think the gas price spike has more to do with speculation than the "powers that be" want to admit.

=wr=

[mattkime]

i'd still like one person to explain how speculation drives up prices.

[Mac1337]

Darned! I just filled up.

[Grace62]

mattkime wrote:
i'd still like one person to explain how speculation drives up prices.

Super complicated and not well understood... I've tried reading about this and it's pretty convoluted...maybe an energy market analyst will join us and put things into plain language.

Basically, investors bet on whether the price of oil will rise or fall, and in so doing they cause price changes that aren't "natural," or that wouldn't happen in the absence of speculation. Complicating things further is the situation which supply, producers are OPEC and national companies that work closely to control supply, making it very different from way wheat or sugar.
Here's a good piece from a few years ago:

Jul 1, 2008
Rising cost of oil 'due to speculation'

As long as oil prices continue to spiral, pundits seem destined to argue over the reasons why. Increasing demand from emerging Chinese and Indian markets is sure to be at least partly to blame, but no-one can agree on the influence of another possible cause: financial speculation.

Speculation drives up the price of a commodity beyond its natural value and can happen in several ways – for example, when investors hedge against future oil prices if they are expected to appreciate.

Now, econophysicists Didier Sornette of ETH Zurich, Switzerland, and Wei-Xing Zhou of the East China University of Science and Technology, together with Ryan Woodard of ETH Zurich, claim that speculation must have driven some of the escalation in oil prices. They have found evidence for a "bubble" – an indicator of speculation – in prices since 2003, when the cost of an oil barrel was four times lower than it is today.

Super-exponential growth

Bubbles are a controversial topic in academic finance because there is no clear way to define them. However, Sornette’s group says it can pin them down by examining the precise rate of growth in prices.

In an economy without speculation, the price of commodities tends to grow by a fixed percentage every year; this is an exponential rate of growth. But when an economy is influenced by speculation, the percentage increase can grow too. This gives rise to a power-law growth or, as the researchers call it, a "super-exponential growth".

Sornette’s group has looked at three different models to see if oil prices exhibit super-exponential growth. Each of these models is based on a "log-periodic power law", which characterizes the super-exponential growth, and contains three main parameters: the time when the bubble is expected to end; the exponent of the power law; and a scale factor. The researchers found that all three models fitted the oil-price data well, implying that the growth has indeed been a bubble (Physica A submitted; preprint at arXiv:0806.1170v2).

'99% certain'

Could it be that there is no financial speculation, but that the demand for oil from China and India is growing super-exponentially, like a bubble? Sornette’s group cites figures on world oil supply and demand from the International Energy Agency that suggest this cannot be the case. Sornette told physicsworld.com that he is "99% certain" speculation is influencing current oil prices.

Sornette group first came up with his theory of super-exponential growth as a symptom of economic bubbles in 1996. In 2005, they used it to predict the burst of the US housing bubble.
About the author

Jon Cartwright is a reporter for physicsworld.com
http://environmentalresearchweb.org/cws/...news/34822