Oil Prices Drop, Sadly
The price of oil dropped $2.19 today, to $117.91, spurring a stock market and dollar rally. Sounds like good news. Except that it's dropping because the market thinks more people won't be able to afford to drive their cars as much. Who's up for a "staycation?"
Oil Prices Tumble Again; Stock Markets Surge [NYT] (Photo: hanapbuhay)
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@Git Em SteveDave displays attention-grabbing vanity: I heard it in a Raymore and Flanigan home furnishing ad the other day.
@Git Em SteveDave displays attention-grabbing vanity: It's been buzzing around all summer. It's called, what I did for vacations as a kid. You know, living on the Jersey Shore and going to the Jersey Shore an hour south for a week for vacation.
Agreed, it is an annoying, bullshit word that I've only heard in Daily Show montages of idiot network news anchors and now, on Consumerist.
just market forces at work. Its not something to be sad about.
@Ben Popken: OK. Did they invent it? I guess I'm like George Carlin sometimes and like to know where a word came from. I know words sometimes surge in popularity, like "gravitas" did during one election season, but I had never heard this before.
@chiieddy: I lived 10 minutes away from Seaside Park and only visited there like 10 times in 4 years. I rarely visit the shore, even though I live here. I think it's b/c of my severe dislike of Bennies.
The market thinks that because it's true. So much of our economy and way of life is built on people working relatively low-paying jobs far enough away from home and in areas without sufficient mass transit that most of those people have to drive to work. Fuel costs, meltdown, general market malaise in response to this "not-recession" all add up to lower consumption across the board.
I'm confused. Your sad because oil prices dropped, and the economy is doing better? I'm honestly confused.
Oil prices dropped because speculators learned that Americans wont put up w/ those prices. Politics for alternatives came on heavy, and demand shrunk several percent.
Americans: 1
Speculators: 0
Well, this kind of sucks. I try to offset the depreciation of my real property (i.e., my house) due to a popping bubble that was never supposed to happen, with investing in oil futures (the price can only go up, right?)! Now that oil is dropping, too, I guess I need to recoup those double losses with something else. Didn't GM spin off the Hummer division? That can only go up now that oil is falling, right? Time go make some trades…
"Staycation" was created because people still took "vacation" time, but couldn't afford to actually go anywhere, so they "stayed" home.
Does it sound like good news? Just curious.
I don't agree this is why prices are dropping. It would be sad if the ONLY reason prices were dropping was because the economy was too terrible for anyone to drive. and yes, we are all driving less.
However, prices have been inflated. Everyone knew they were inflated for months. From OPEC head honchos to wall street. It was a bubble and speculators(the main reason prices were so high) are pulling out. Finally
This is good news, I dont get why consumerist always has to be cynical and pessimistic.
Oil prices down,
Stock market up,
Dollar getting stronger,
People driving less (less accidents, traffic).
Nothing sad about that news.
@balthisar: It was bound to happen. Speculators drove up the costs artificially and there was always going to be the point where people finally got scared prices would go back down and try to get out before that happened. Is this it? Probably not. But if prices to go down and stay there, the people playing the futures market will only get what they deserved for trying to siphon money out of people's pocket books.
They've been using "staycation" down here in FL for the last couple of months. Trying to get people to stay instate at Florida resorts not flying to other places to go on vacation.
"Americans wont put up w/ those prices"
I don't think Americans had a huge say in the matter. Yeah, they drove less, causing less demand, but really it's more a combo of that small fraction added to struggling economies around the world.
Like for instance, China just jacked their gas prices up by cutting down on some subsidies.
I think Americans don't really get a full +1 point for this one.
I'm confused as to why this is a bad thing as well...
Prices are dropping because energy prices have become a huge deal in politics, and no matter who is elected their policies should downwardly affect gas prices. Either Obama & his alternative energy credits will lower demand, or McCain and his new drilling will increase supply. Either way, regular ole Americans win and oil prices lose.
@Git Em SteveDave: I've heard it used in radio commercials (since around May) for the local travel board.
@Bladefist: Oil prices have dropped, that's true. Is it a significant drop? Not at all. Prices are still higher than they were 2 years ago- but Americans seem to think that Jesus has risen because they are lower than a month ago.
Suckers.
So- prices are still high, honest people are still getting it in the ass, and speculators are *still* making record profits.
Americans: 0
Speculators: 1
"When you're born, you get a ticket to the freak show. When you're born in America, you get a front-row seat." Sometimes, I feel the thanatos in me. Much like Carlin said, I just sit back and enjoy watching the world tear itself apart
@Bladefist: Oil prices dropping is good and the Dow going up is good. But I suspect its a temporary increase as the economists are predicting more sour times for end-consumers.
I love my house. But I also love all-inclusive resorts in 3rd world countries. So torn... staycate? or vacate?
@ThinkerTDM: But what people also rarely talk about is that oil prices during the 90's were ridiculously low, and sooner or later this was going to correct itself. Now granted, it did go in the other direction a lot further than many people believed, but an upwards correction was coming. Take Southwest for instance, who thought that this was going to happen so they took a huge risk and locked in oil contracts at higher than market value at the time. Now they look like geniuses.
Supply and demand is still the rule. And gas in the US is still cheaper than just about every other western nation.
"it's dropping because the market think more people won't be able to afford to drive their cars as much"
Next week I'm taking a flight to New Mexico, where I'm renting a car and driving all over the state, more than 700 miles when all is said and done. So, HA! That'll show 'em!
Waitaminute...
Gas is expensive but we only spent an extra $200 on a 2,400 mile road trip. Road trips are still my fav and I will never stop doing them.
Oh noes! Those poor-poor speculators! Now what will they do with all those bizillions. I'm sure they are all taking stacations now that oil is falling faster than a prom dress on prom night.
Won't somone think of the Speculators children!
@Counterpoint: Or they might do nothing at all. Obama's plan is intended to fund research; research which probably won't make its way into the real world for several years, if at all. McCain's offshore drilling will take years to build the new rigs, and won't have a real effect for even more years. I heard government studies say it won't have a real effect until 2030. Either way, oil prices will still be the winner for a long time to come.
Remember, take anything a politician says with a grain of salt, buried in a pile of salt, located in a salt factory.
@LastVigilante: I put over 1000 miles driving through Arizona & Utah back in May visiting all those beautiful National parks. During that week of driving, I watched gas prices go from $3.50 / gal to $4.07 / gal.
Vacation was still a blast and we loved every minute of it
@pastabatman: I read demand went down 3%. That's pretty huge.
@ThinkerTDM: Well I agree. I think *some* people are just happy prices are down. But I think a lot of people still realize we're a long way from where we should be. If America forgets what oil prices should be, and accepts this price as okay, then it just proves ignorance is expensive. It's also the biggest commodity in America :)
@Tiber: I'm not taking a partisan view on this. I will agree on your research. It takes years. As far as the McCain thing. I've heard some oil/energy experts who are vastly confused where this "10 years before it helps" argument. They said it may take 10 years to find the best place to drill, and get permits, etc etc .... But for ANWAR and Offshore- That research has been done.
And if allowed to drill, it would take weeks to setup ANWAR, and months to setup off-shore, and the effects are nearly immediate. I am not an expert. I am just half-way quoting "experts". And they have no clue how the media gets their data.
China's been trying to clean its air for the Olympics. It's not just high prices here (and globally) that's restricting demand, it's also that a huge and relatively new market has just dropped out of the competition for oil barrels. After the olympics are over and things in China go back to normal, prepare for the increasing prices again.
Speculators or no. While I agree that a hole lot of the problem is due to speculators, the real problem is that gasoline has just been terribly underpriced for so long that it seems outrageous now that gas prices are starting to closer reflect reality.
Hell, I can't even afford a staycation. It looks like I'll be taking an imagication this year.
Well, so much for the push for alternative fuels.
Feed me, Seymour!
Just got finished with a summer "staycation" here myself. I live in SoCal, so we went to Palm Springs (an hour away), stayed at one of those timeshare resorts ($99 for 3 nights, if you sit through their 2 hour presentation), used a couple $25 restaurant.com gift certificates that we bought at 70% off to check out the local cuisine on the cheap, then splurged and rode the Palm Springs tram up Mount San Jacento and had a picnic of PB&J sandwiches at the top. We all had a great time and the total expenditures for four days with four people, lodging, food, transporation, and entertainment was about $300
Perhaps people are inflating their tires.
@Angryrider: Capitalism is pushing alternative fuel. A lot of places are currently researching it. Some for the environment, some for the profit. Some both (T Boone Pickens)
@ARP: Ya, I believe we half only just recently hit the half way point. But I believe oil speculators have learned a valuable lesson.
I agree with the point about the Olympics. One of the driving forces for the sudden surge in oil prices was China rushing to rebuild its cities in time for the Olympics. When a country with five times our population puts its economy into overdrive, the rest of the world suffers for it with higher gas and food prices. When I was in Beijing two years ago, most of the capital was being torn down and rebuilt with new super highways, subways and high-rise buildings. However, the Chinese have overbuilt now, and the air pollution was so horrendous just before the Olympics that they had to take millions of cars off the road and shut down factories, and the pollution is still there! Amazing what they'll do to save face.
I personally think gas prices are about to drop off a cliff. We'll see a tumble, then they'll start to rise again and stabilize at a lower level. I'm already seeing stories about the oil bubble bursting.
Wait a minute. I thought the story was that speculators reselling contracts over and over drove the price up. Democrats made it sound like speculators always bought at a higher price than the person before. Now speculators aren't doing that any more? Why did they stop? Don't they want to make more money? Someone call Chuck Schumer and get the answer, please.
It is bad news... obviously neither our government nor the free market will ever wean us of our addiction to oil. Does anyone not believe that our planet is warming? Burning oil is not a long-term success strategy.
The only way we will make positive change (alternative fuels, conservation, etc.) is if we are forced into it. I have seen that human beings are capable of incredible accomplishments, providing someone forces them to do so.
I commute 60 miles a day, and yes it hurts financially, but it's time we woke up from the postwar dreamworld of $1, $2, or even $3-a-gallon gasoline.
@Counterpoint: Numerous smart people have pounded the numbers and allowing Big Oil to drill in damn near everyone's backyard, for free, would have negligible impact on prices and even then, not for many, many years.
I.E., allowing Big Oil to despoil our coasts *might* result in ten-twenty cents/gallon relief, right around when Obama finishes his second term. Then only have an impact for the next two Presidential terms (and that's optimistic).
No magic wands here, people. Or Pixie Dust. Were that were so.
Besides, Big Oil already has thousands of leases allowing them to drill which aren't being exploited. Let 'em eat what's on their plate before we let them go for seconds.
@Bladefist: Saying "it'll take x years," is a perpetual excuse to do nothing; it isn't even an argument. President Clinton vetoed an ANWR bill in 1996. If it would have taken ten years, that's two years on we'd be now. Some of those same people have been saying "it'll take ten years" for more than ten years. Zeno's dichotomy is not a valid energy policy.
@Hongfiately: Agreed. I can't believe this:
Paris Hilton is right. Drill now, Research now. Both sides start now.
@Bladefist: She is absolutely right. The two are not mutually exclusive as some would have everyone believe.
@Bladefist: I agree that speculators will probably learn a valuable lesson. But isn't it their lesson to learn?
The "speculators" have just as much a right to purchase oil as you and I do. And they have the right to sell it to anyone they want at a price that both parties accept.
If they get caught holding a futures contract for a few hundred barrels at $150 a barrel and it drops to $100 or less, they're effed. That's the whole point of a free market -- it carries both risk and reward. That said, I hope they all get caught naked with high priced contracts as the price gets back to a more reasonable level.
Your source article has one quote by one man at one bank, and then never addresses his quote. I don't buy this notion that prices are falling because they think people won't be able to afford gas, and certainly not because one Australian guy's quote made it into a NYT piece.
@Hongfiately: But for how long? 10, 20, 30 years? Why not branch out now while we still have time? If we can slow down our monstrous demand for oil, we can decrease the amount we need to import, and we can use our domestic supply for the few cases where only oil will work.
So here's my offer: I will agree to support domestic drilling, and maybe even ANWR, IF we change the national speed limit to 55, begin building massive solar and wind arrays in the vast, vast stretches of desert in the midwest. Too expensive you say? With the cost of the Iraq war, we could have laid out more than enough solar panels to power this entire country. What a shame.
You can't kill my wildlife and despoil my wilderness unless you're willing to make sacrifices.
What did this word "Staycation" come into existance? This is the second time I heard it today, and the second time I have EVER heard it. The "real" reason that the prices are dropping will soon follow in the form of a "plot" to lower prices to ensure a Republican gets into office. I really think it's that people are getting a little more rational, and not freaking out when the speculators try to get them in a frenzy, and the prices will relax.