Well, the reserves of refined gasoline are lower than they should be and even though demand has lowered considerably, politics and growing tensions along with economic problems and such in third world countries has kept gas prices high. This along with Iran's nuclear ambitions (it's quite obvious that Iran is up to no good as usual and wants to have nuclear weapons) and the fact that some of the world's largest reserves are starting to run out - why else would the middle east be investing so much money as it has in areas other than oil (banks like Citicorp, real estate, etc...) in such turbulent times with no clear rally on the horizon? Because they know something that you don't - the world has less oil than it thinks and it is slowly running out.
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All these items mean that the current drop in the price of oil was and will be very short lived. I know, you can see Jim Cramer scurying around, ranting and raving like a lunatic that oil is going to go to 100, but you have to understand, Cramer is like a weatherman - he is only right 50% of the time. Oil and gas will only go up because they have to. China, INdia and other large countries with billions of citizens will be using more oil every year and supplies will go down. It's simple supply and demand.
Now, the quick drop in oil prices over the past 2 weeks or so dropped too much and so will bounce back and probably to the $130's range for now. Yes, it may rally and then drop and then rally and so on. And maybe it will drop and touch 100 so Jim Cramer can say, "I told you so" only to immediately bounce to $148 or even a new high at $150 per barrel. So this quaint little drop in current gas prices means that soon gas and oil prices will go back up. Airlines will return to figuring out odd fees and pricing structures and more to try and help make ends meet (I think that they should cut the executives pay for losing money - whom ever heard of a company that was losing money left and right paying umpteen millions of dollars in compensation to executives that basically suck - if they were any good and the airline industry were so bad, they would use their resources and start investing OUTSIDE of the airline industry - look at Warren Buffet and Berkshire Hathaway - it no longer is in the business it originally was and look at how it flourished).
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So, for the near term look for gas prices to creep back up to $4 per gallon or so and for oil per barrel to return to the $130's to $140's. I am sorry, but until the democrats in congress get together and release the laws against off shore drilling and drilling in national parks, the price of oil and gas just won't get much better (it would also help if more effort was made to use natural gas (CNG) and other alternatives to foreign oil). And this is supposed to be a very active hurricane season - all it takes is one major hurricane half the size of Katrina to bring about $5 per gallon gas or even worse (depending on where it goes). Throw in Iran and the fact that Israel wants to bomb their nuclear refining plants before President Bush is out of the office so they have his backing and you could get another steep jump in the price of gas. To say the least energy and especially oil is a very volatile market in a crazy market and down economy. I wish I had good news on this, but I just tell it like it is.
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