Sorry, Justin. Too late. The speculators are, in fact, the direct cause of the price drop. They are dumping all of the oil futures they were buying when the demand for energy was strong, and the price has crashed as a result. If you are going to blame speculators for the price increase, you must certainly blame them for the drop, since they aren’t “staying the hell out of it” when they are unloading their shares for whatever they can get for them.

You do see that you just proved my point, right?

The speculators saw the demand start to drop so they dumped their shares. That’s what caused the price to plummet and become realistic again. Because now it was tied much more closely to actual supply and demand instead of the phony supply problem everybody thought existed in the first part of the year.

You know, when I kept on arguing that there was no supply problem and that energy speculators were just hoarding supply and you argued I was full of it?

Merry Christmas!

It’s the same for businesses. A coffee shop has to have coffee to sell. They don’t have a choice.

Price is simply not a major factor in how much gas people buy. They need it, they buy it. Reducing fuel needs even a little is a huge hassle. Every year before this one summer driving season was also a bitching season because nobody likes having to pay $3.00 for something that was only worth $2.00 six months ago. Nobody changed their behavior very much.

It wasn’t until this year, when it gas hit $4.00, that people actually changed their behavior. At all. Sales of hybrids took off. EVerything else tanked. And tanked so spectacularly that even the storied Toyota took a loss. It’s first. Ever.

I’ve always been skeptical of the influence “speculators” had on gas prices. Oil is not real estate. Real Estate speculators actually buy houses, which increases demand, and market equilibrium is not restored until all of them sell. Oil speculators never buy actual oil. They buy the right to oil that will be pumped and delivered at some future date. They have to a) sell that right before the oil is delivered, or b) also buy a facility to store oil.

So speculation just makes oil prices a lot more volatile. It’s a pain, but it’ll benefit us as often as it screws us.

BTW, don’t be too hard on options contracts. They sound silly, but they actually save lot of money. One central market selling all the beef in the country is a lot more more efficient than every farmer hiring a sales staff. It’s also helpful because it allows farmers to get paid for things they haven’t grown yet. Your average farmer only has goods to sell a few times a year (at harvest).

I’m sure there’s a bit of speculation going on, particularly with the economy heading south faster than Canadian Geese in November. But I’m willing to say that speculation is playing a relatively smaller part of the price drop than simple supply and demand.

I’ll skeptical of the notion that everyday consumers are driving less as some sort of direct, voluntary, intentional effort to use less gas. People are leery of spending money in these times, so they aren’t driving to the store. All the people who lost their jobs aren’t driving to work. So I think the downward trend in consumption is in large part a simple side effect of bad times.

People are in general sticking closer to home , though. I think. Not saying there is nothing to it, I just think that the vast majority of any given individual’s travel is a function of everyday activity and so is driven by that. I don’t believe we are seeing a direct change in driving behavior where people are letting their behavior be substantially dictated by a desire to conserve fuel.

For many folks, it’snice to believe that, and it casts a hue of virtue over consumers, but I don’t believe it.

My guess is that it’ll be both and hopefully the energy speculators will stay the hell out of this and not try to game the market the way they did previously.

Sorry, Justin. Too late. The speculators are, in fact, the direct cause of the price drop. They are dumping all of the oil futures they were buying when the demand for energy was strong, and the price has crashed as a result. If you are going to blame speculators for the price increase, you must certainly blame them for the drop, since they aren’t “staying the hell out of it” when they are unloading their shares for whatever they can get for them.