I certainly hope so... http://news.yahoo.com/s/ap/20080502/ap_on_bi_ge/oil_prices NEW YORK - Retail gas prices fell slightly Friday — the first time in 18 days they haven't risen to a new record — and analysts say pump prices may be peaking for the year. ADVERTISEMENT Oil futures, meanwhile, rose sharply after Turkish airstrikes on Kurdish rebel bases in Iraq injected some supply concerns into the market and the Labor Department's employment report gave investors reason to be optimistic about the economy. The national average price of a gallon of regular gas fell 0.1 cent overnight to $3.622, according to a survey of gas stations by AAA and the Oil Price Information Service. That's the first time since April 14 that retail prices have fallen. Diesel prices fell 0.2 cent to a national average of $4.249 a gallon. "It could go up just a little bit more," said Fred Rozell, retail pricing director at the Oil Price Information Service, in Wall, N.J., but, "I think it's running out of steam." Prices could reach $3.70 a gallon, "at the most," Rozell said, but are highly unlikely to rise to $4 on a national basis. Still, motorists in parts of states such as California and Hawaii are paying $4 right now. Soaring gas prices are cutting demand for gasoline, and analysts have long theorized that falling demand will eventually force prices lower. However, gas prices bucked those forecasts for most of the spring and followed oil's sharp gains. On Friday, light, sweet crude for June delivery rose $3.60 to $116.12 a barrel on the New York Mercantile Exchange. Turkish warplanes bombed Kurdish rebel bases inside Iraq for three hours overnight, a rebel spokesman said Friday. When conflict breaks out in the Middle East, investors often buy on concerns that supplies will be disrupted. Some investors were also buying crude on a view that the economy is improving, analysts said. The Labor Department said employers cut far fewer jobs in April than expected. "If the jobs (situation) isn't as bad, maybe we'd see a snap back in demand," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. For a change, investors shrugged off the dollar, which rose on a theory that the employment data means the Federal Reserve is less likely to cut interest rates further this year; falling rates tend to weaken the dollar. A rising dollar undercuts the appeal of commodities such as oil as a hedge against inflation, and makes oil more expensive to investors overseas. The rising greenback helped pull oil prices back to nearly $110 a barrel on Thursday. Oil's climb to almost $120 on Monday from about $64 a year ago was largely due to a protracted decline by the dollar, analysts say. However, oil's connection to the dollar can be broken when other factors predominate, as they did Friday. "It's not a perfect relationship, and on any given day, oil will choose to go its own way," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. Still, analysts think the market's decision to shrug off Friday's stronger dollar will be short lived, particularly if the Fed holds interest rates steady and the dollar continues to gain. "It will be difficult to sustain (oil price) rallies in the face of any further strength in the dollar," Ritterbusch said. And that means retail gas prices will likely rise no higher than $3.65 to $3.70 a gallon, before falling back toward $3 a gallon over the summer, he said. In other Nymex trading Friday, June gasoline futures rose 7.61 cents to $2.9543 a gallon, and June heating oil futures rose 9.02 cents to $3.2079 a gallon. June natural gas futures rose 17.6 cents to $10.737 per 1,000 cubic feet. In London, June Brent crude futures gained $3.72 to $114.22 a barrel on the ICE Futures exchange. ___
In short term, there's a price bubble in oil prices. But in the long run, barring any major advancement in alternative energy, it may indeed go to $200/barrel. It's all supply-demand.
What the author is noting is that the dollar appears to be gaining strength. When this happens, commodity prices drop. When the commodity (oil) drops, the assumption is that gas prices will decline. Will it? Who knows? Only time will tell. I, for one, will have to see it to believe it.
Oil (as well as most other commodities) is denominated in US dollars, so a strengthening dollar directly translates into lower oil price. Though price at the gas pump is not linearly related to the crude oil price, the relationship is positive. But it seems that the Treasury department at this moment is more concerned with the economy than with the strength of the dollar. Since US export, due to a weak dollar, is giving the economy much of the support it needs, I'm not sure whether the Treasury would welcome a much stronger dollar.
Whether the Treasury would welcome it or not may not matter. All week long it appeared as though the dollar was inching upward, particularly against the Euro.
The ECB in recent weeks has also been talking about taking more action to undermine the Euro, since it is hurting their exporters.
This feeds the fire that is the dollar growing stronger compared to the Euro. As the dolloar grows stronger, oil will fall in terms of nominal dollars per barrell. I think that is what the analyst in the article sees. Whether or not this is a good thing remains to be seen. Many economists believe that a weak dollar hurts our economy...so it seems that a stronger dollar would go a long way to repairing some of the damage.
Another thing that helps falling oil/gasoline prices is a weak US economy. If the economic figures get worse or into full blow recession, you are guaranteed a sell off in gasoline and/or crude, as less well being in the economy translates to less gas consumption.
I work on a commodities/derivatives trading desk, but one of the currency analysts at my work was telling me how there hasn't been the strong volume accompanying the dollar rise (in regards to the Dollar Index futures). There is a strong volume leading the Euro Fx futures fall, but it seems that money is traveling into other currencies instead of just the Dollar Index. This suggests that the Dollar Index up move might be just a bear market rally and will lead to further declines and testing of lows going into the next few months. He said he suspects alot of money is being bought into the Australian Dollar at this time. In regards to Crude Oil and futures volume, crude's fall has been with stronger volume, so we might indeed be seeing a shift. Generally in basic market terms, you want to see strong volume accompanying any move to give confirmation that the move is indeed backed by strong forces and just not a transitory phase.
