What many residents want to know is, how far will gas prices drop compared to descending crude oil prices, and will the price of crude move upward again?
Specifically on Thursday, light, sweet crude for June delivery sank by $9.44 to $99.80 a barrel on the New York Mercantile Exchange. According to MarketWatch, that's the biggest one-day percentage decline since April 20, 2009. Futures also declined, albeit less dramatically, in trading on Wednesday.
Analysts attributed the price fall-off to a stronger dollar, which triggered a move of investors from the commodities markets, and the prospects of a weaker-than-expected U.S. economy, which would suppress demand and lower expected prices.
In particular, a bad mid-week jobs report by the federal government placed initial unemployment claims at 474,000 during the last week of April, the highest level since last August and surprising analysts who had expected the number to decline.
Add to that lower business productivity and the biggest drop in hourly wages in three years, and the economic picture suddenly became a lot bleaker consideration for investors.
Will crude stay down?
By week's end, some analysts were indeed predicting that the price of crude would continue to fall, and many newspapers were touting the expectations of lower gas prices through the summer.
Perhaps, but that would require a sustained slide into recession. And, in fact, on Friday morning, on the heels of the bad unemployment report, the government had good news, announcing that private-sector employers added 244,000 jobs last month.
Already, the price of crude had ticked back up to $105.
If anything, the shifting short-term economic numbers suggest it is risky business to use them to predict the price of crude.
For the long-term, though, other analysts warn, global oil demand continues to rise, and that should push crude higher overall.
According to the Energy Information Administration, world crude oil and liquid fuels consumption grew by an estimated 2.3 million barrels per day n 2010 to a record-high level of 86.7 million barrels a day, and the agency expects world liquid fuels consumption to grow by 1.5 million barrels a day in 2011 and by an additional 1.6 million barrels a day in 2012
Translation: higher prices for oil and gas in the long-term.
Indeed, ForecastChart. com put it this way in February:
"Over the last year oil prices have averaged $81.46. The average price over the last 10 years was $57.02. Higher Crude Oil Prices over the last 12 months compared to the average oil prices over the last 10 years serve as an indicator that the long term rate trend in the Crude Oil Price is up. Oil price expectations should be adjusted accordingly."
Et tu, gas price?
Still, a stronger dollar and a slumping economy - in part slumping because of rising oil prices - could suppress prices for a time.
If they do, gas prices will come down. The question is by how much.
Overall last week, crude oil futures for delivery in June slipped 12.4 percent. The question consumers want to know is, will gas cost 12.4 percent less in June than the peak price paid last week?
That would lower the price of gas by 52 cents a gallon, to $3.72, in the Northwoods. According to gasbuddy.com, the average price for a gallon of unleaded regular gasoline in Wisconsin was $4.115 on Thursday. A 12.4-percent drop would send that level to $3.60.
Most analysts agree retail prices won't fall as fast or ultimately as far as the price of crude oil, but many disagree on the reason for that. Some blame stubborn distribution and overhead costs; others suspect old-fashioned price gouging and profiteering.
Others say it's just the economics of gasoline. Retailers can't mark up gas enough to match their cost increases when crude oil spikes - their margin shrinks - and so when crude prices slide they don't match the decrease in an effort to recoup the margin lost in the upswing.
Others doubt that.
To be sure, when crude oil prices set a record in 2008 at $147 per barrel, the U.S. average price for regular gasoline climbed to an all-time high of $4.11 per gallon.
Between that point and April 2010, crude continued to fall, to about $85 a barrel, a decline of 42 percent. As expected, retail prices did not drop as much, moving from $4.11 to $2.86, a decline of only 30 percent.
But what about this past year's upside? Were retailers losing margin? It doesn't appear so, at least not on average.
In fact, the average retail price went from $2.86 to $3.86 in April this year, a spike of 35 percent, while the price of crude rose from $85 a barrel last April to an April 2011 average of $111, a growth of only 30.5 percent.
So retail gas hikes matched the rise in crude over the year, while not falling as far as crude prices over the two-year tumble that preceded it.
The politics
All of it makes for good political theater.
While most of the debate is on the national stage as lawmakers debate oil-company subsidies and the need for increased domestic production of energy, including domestic oil drilling, at least one senator involved a Wisconsin recall battle weighed in on the issue, calling with fellow Democrats for an end to oil subsidies.
Sen. Dave Hansen (D-Green Bay) said record high gas prices were straining the budgets of middle class and working families, while big oil companies reported record profits.
Hansen stressed that he was an opponent of Big Oil.
"Wisconsin consumers shouldn't be hit twice, first at the gas pump and then in the federal budget, to subsidize the record profits of big oil companies," Hansen said.
The senator wasn't clear what he would do with the $4 billion a year the U.S. government would save by ending the subsidies, however. In one quote, he suggested both cutting the deficit and spending it.
"Eliminating the $4 billion oil and gas companies currently receive in subsidies from the federal government would reduce the federal deficit and instead help fund other priorities like education and health care," he said in a statement.Source www.lakelandtimes.com... For the latest updates PRESS CTR + D or visit Stock Market news Today
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