Thread: Financial News
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Old May 12, 2011, 08:26 PM
iDumb iDumb is offline
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Quote:
Originally Posted by Rifat
i don't know if this is the appropriate thread for this: but why are gas prices so high this season? I pay around $4.33 per gallon while about a couple of months ago i only paid a dollar less than that. what's going on?
Oil market is pretty complicated, it is very controlled. To get a good idea of where the price at pump will be going, you should follow the price of crude oil. Recently, there was a mini-crash there sending crude oil below 100. But to see that change in the gas pumps takes weeks to months.. as millisecond trading can not be converted to gas station price. So, the consensus is if crude oil stays below 100, the price at pumps SHOULD go down in coming months even though historically oil prices supposed to be going up as summer approach.

There are many factors that contribute to this price fluctuation. But the recent rise is due to devaluation of dollars. There is an inverse correlation. As all the commodities are price in dollars - when dollar is devalued - the "intrinsic" value of the commodity kicks in and price goes higher in terms of number of dollars.

As long as dollar is being devalued, things like oil and gold will be rising. Recent rise in stock market can also be attributed to this devaluation of dollars. So how to stop dollar from dropping like that. One way to do is for federal reserve to increase the interest rate, getting rid of cheap borrowing of dollars. But this is a dangerous time to do that as stock market will react negatively with rise in interest rate.

That is a dumb down version of it (or the way I understand it), ppl with economics background can explain more.

As I said initially oil market is controlled. Some examples are: in times of election, it is often seen that gas price drop dramatically at the pumps. Also OPEC is very careful in keeping the prices high and profit rolling. They will always supply short of the demand for oil...
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