The biggest reason gas prices are down is that the spec funds are liquidating. We have the largest surplus of crude oil in nearly 25 years here in N. America and gasoline usage is down about 4% from last year.
The price of gasoline futures has dropped about 30 cents in the past two weeks as the spec funds bailed out. We do not have a competitive market in energy like we do in say corn. With corn, you have thousands of producers and many hundreds of users, from grain elevators to ethanol plants, livestock feeders and exporters. If prices get out of whack, one side sits and the other gets active, pushing prices back towards “fair value”. In crude and gas, there are only six producers in the world, basically, and they control the product from the ground to the pump. When speculators drvie the price up, they just peg the price there and keep all the money.
Right now, the US is producing an excess of gasoline, but we are now exporting record amounts of gasoline to other countries with higher priced gas. Much of that is courtesy of the sanctions on Iran and from the lost crude they’d be selling.
The next time you hear drill baby drill, just remember that the oil we are now getting is being exported to keep our gasoline prices high so that Exxon can make record profits and still not pay any Federal taxes. Sweet deal.
I trade this stuff for a living and I just covered my shorts yesterday. Gas futures are up two cents this morning, so don’t worry, after the election, they’ll go back up.