Massive energy speculation mixed with much lower demand is driving the price down, down, down for the foreseeable future.
A report by the Commerce Department showed that sales of new homes fell in November to the slowest pace in nearly 18 years, while new home prices dropped by the biggest amount in eight months.
“The energy markets are reacting first and foremost to bad economic news, and it seems like they’re almost waiting for something bad to occur,” said oil analyst Peter Beutel of Cameron Hanover.
A steady outpouring of gloomy economic news has pushed to the background events that over the summer may have led to price spikes, like OPEC’s announcement this month of unprecedented production cuts, Beutel said.
Prices have fallen 73 percent since July, with massive job layoffs and weak consumer spending eating away at energy use.
Now, I think it’s pretty clear that the economic news is only going to get worse before it gets better (perhaps much, much worse), so what does this do for oil prices?
Will consumers continue to drive less in hopes they can collectively keep their costs down?
Will OPEC continue to cut production to push up the price?
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. Because I think it’s blatantly clear that Americans didn’t start driving THAT much less to drive the prices down nearly 75%. There had to be a massive dose of speculation going on there and once they saw the demand start to drop, they dumped their stockpiles on the market and the prices plummeted.
And to that point about energy speculation, would it be a good time for us to start putting more regulations on the type of trading that drove the prices through the roof? Especially during these tough economic times we need to know what the price of a barrel of oil will be.