Let's hope that $3.30/gallon regular gasoline is an indication of a "bubble" that will burst. The economy is already beginning to tighten its collective belt and people are "just saying no" to travel. Airlines and the tourist industry are getting hurt. Now hurricane Katrina has thrown another wrench into the gears. Will oil prices fall back?
Some, such as Irwin Kellner
Output from the Organization of Petroleum Exporting Countries alone exceeds 30 million barrels per day, and is still rising.
Why, then, are crude oil prices going up? Speculation, that's why.
Lured by rising prices, speculators have been pouring tons of money into the spot and futures markets, betting that prices will go even higher. They're forgetting one thing: the law of supply and demand.
The higher oil prices go, the more likely it is they'll fall. Either demand will drop off or new supplies will come onstream.
This could well result in speculators leaving the oil market as quickly as they came in, thus driving prices down even more.Dr. Irwin Kellner is chief economist for MarketWatch. He also is the Weller professor of economics at Hofstra University and chief economist for North Fork Bank.
and David Nassar,
As crude retraces on each report that hinders higher prices, we begin to sense the market better suggesting the fear premium priced into oil is "priced to perfection" -- meaning that in the absence of sensational news, oil's correction seems ever closer.
Certainly unfortunate and substantial news could move prices higher, but fear is factored into the market and this leaves room for the oil bears to step in.
Editor's note: David Nassar is chairman and chief executive of MarketWise.com.
Let's hope they are right or it could be a very long economic winter.