Thursday, August 4, 2011

Good news: cheaper gasoline on the way

With almost everything collapsing today it's probably time to highlight some good news: the big drop in oil prices in recent days means we could see gasoline prices at the pump fall by about 15% in coming weeks.

The top chart compares the price of crude oil futures (white line) with gasoline futures (orange line). Gasoline futures appear to be lagging crude futures, which suggests that gasoline futures have further to fall, perhaps to $2.40/gal.

The second chart compares gasoline prices at the pump (white line, which comes courtesy of AAA) with gasoline futures prices (orange line). Based on past correlations, today's $86.6/barrel of crude oil should, if it holds, result in gasoline prices at the pump falling from $3.70/gal to $3.10.


Bill said...

Do you think this is the start of a new financial panic like 2008? Perhaps this is why M2 was spiking per your previous posts?

Scott Grannis said...

I think the reason for the spike in M2 is now becoming clear: the onset of another panic. Lots of money seeking the safety of FDIC-insured dollar deposits. I note that BoNY is now going to charge people with very large deposits. Interest rates on checking accounts are now negative! A classic sign of a bank panic, with the fears centered on European banks.

Benjamin Cole said...

The core CPI was up 1.6 percent YOY--even with a 35 percent in fuel costs in the same period.

Now, the headline will go negative for a while, and core will sink below 1 percent.

Reading George Gilder again, I feel the right-wing has lost its moorings. Obsession with minute rates of inflation is not what conservatives should be about. Besides, the Japan scenario is not on I would wish on any investor.

Conservatives should argue for pro-business tax and reg policies, especially policies that promote new business formation.

Bernanke-san caved into the Nipponistas, and we are going to pay.

Paul said...


"Conservatives should argue for pro-business tax and reg policies, especially policies that promote new business formation."

They have been doing that already. Guess who's blocking them?

Benjamin Cole said...


Conservatives today have blurred their platform beyond repair, I fear.

Think about the GOP: Gay marriage, abortion, gun nuts, an unnecessary but bloated/ossified military (now double real outlays of 10 years ago) and warmongering, USDA, ethanol, mixing church and state, extreme sensitivity to the tax rates of the top 1 percent and monetary fanaticism--it is not an appealing picture.

I concur the option is not appealing either.

Frankly, that is why I say I will vote for Ron Paul. And Paul believes men in flying saucers deposited Bernanke at the Fed. Yet even he is a better choice than the GOP or Dems.