Gas and oil determined to drop as prices pinch customer demand

As oil and gas costs rise continuously, consumers are reminded of the gas shock of 2008. While supplies of gas and oil in the U.S. are more than adequate, speculators have succeeded in betting the price of oil up 21 percent since the year started. But the law of supply and demand is anticipated to prevail when consumers can no longer afford to sustain demand for gasoline. Post resource – Oil and gas destined to fall as prices pinch consumer demand by MoneyBlogNewz.

Prices on oil

The sweet crude for May delivery went up to its highest amounts since Sept 2008 on the New York Mercantile Exchange. It went up to $111.90 a barrel. This week, gas prices were an average of $3.70 a gallon. That is the highest also since 2008, the summer anyway. Many studied the rise in oil prices. There were many factors that brought on it. With the government shutdown occurring in the near future as a possibility, the dollar is becoming very weak. This means everyone on a different currency is more willing to purchase commodities based off the dollar. It does not seem like the Libya conflict is about to end. The country has already stopped producing most of its oil. The United States is awash in oil considering consumers are spending increasingly more purchasing gas each day. The U.S. Energy Information Administration explained that there was an increase in oil inventories in the U.S. in the week that ended April 1. There was a 2 million barrel increase. Crude refi! nery input rose to more than 14 million barrels per day.

Forgetting about supply and demand

The United States used to blame OPEC for its oil shocks, however OPEC’s role in higher oil costs has been reduced. There was an oil conference in Paris where the United Arab Emirates oil minister spoke. He said that costs have hardly any change any longer because of OPEC. Mohammed bin Dhaen al-Hamli said that OPEC is providing the industry with the oil it needs. Traders are starting to bet on worst case scenarios which have caused a rise in oil costs, he said. The zero rates of interest from the Federal Reserve for hedge funds and pension funds are not helping. This just allows them to bet easier. Analysts estimate that due to speculators, oil futures are $15 to $20 higher than they should be. The next betting madness could be triggered by elections this weekend in Nigeria, where output of 2.2 million barrels a day might be disrupted by violence.

How much longer until an oil tipping point

United States customers may not be willing to pay much more for the gas and oil coming out. Demand for gas has gone down. In the last four weeks the drop was 3.7 percent. Unless there is another issue in the Middle East or in Nigeria, the oil prices might be getting to a tipping point. Before the Fed’s second quantitative easing plan (QE2) started last drop, oil was at about $90 a barrel. Crude oil may go down to $85 to $95 a barrel in June when oil and gas speculators change their minds.

Citations

Wall Street Journal

online.wsj.com/article/BT-CO-20110408-707562.html

New York Times

nytimes.com/2011/04/09/business/09markets.html?partner=rss&emc=rss

Industrial Fuels and Power

ifandp.com/article/0010617.html

Fortune

finance.fortune.cnn.com/2011/04/08/oil-at-the-tipping-point/