Oil and gas determined to drop as costs pinch customer demand

Oil costs are soaring and gas prices are approaching amounts not seen since the summer of 2008. Speculators continue to drive up the numbers at gas pumps, never mind the fact there are no gas shortages in the U.S.. However reality will intrude on the markets, analysts say, when gas becomes too expensive for U.S. consumers to afford.

Prices on oil

The sweet crude for May delivery went up to its highest amounts since September 2008 on the New York Mercantile Exchange. It went up to $111.90 a barrel. United States gas prices reached an average of $3.70 this week, their highest level since the summer of 2008 also. Several studied the rise in oil costs. There were several factors that brought on it. A looming government shutdown is worsening the dollar, which makes dollar-based commodities for instance crude oil more affordable for traders betting with other currencies. It doesn’t seem like the Libya conflict is about to end. The country has already stopped producing most of its oil. However as U.S. customers pay just a little more every day at the pump, the United States is awash in oil. In the week that ended April 1, United States oil inventories went up 2 million barrels the U.S. Energy Information Administration explained. There was an increase in over 14 million barrels a day in the crud refinery.

Supply and demand ignored

It used to be that OPEC was to blame for this. This hasn’t affected it at all though. There was an oil conference in Paris where the United Arab Emirates oil minister spoke. He said that prices have hardly any change anymore due to OPEC. OPEC gives enough oil to the industry according to Mohammed bin Dhaen al-Hamli. The only reason for oil prices rising is due to traders. They are betting on a worst case scenario rather than paying attention to the facts. Oil speculators are being aided and abetted by the Federal Reserve, which has been giving hedge funds and pension funds money at zero percent interest so they can bet on increasing commodity costs. Oil futures are $15 and $20 increased than they need to be at according to analysts. The next betting frenzy could be triggered by elections this weekend in Nigeria, where output of 2.2 million barrels a day could possibly be disrupted by violence.

Oil tipping point

There are signs that oil and gas prices have risen to a level that United States consumers can no longer afford. In just the last four weeks, there has been a 3.7 percent drop in gas demand. Some analysts are saying that oil prices will reach a tipping point soon, unless another crisis in the Middle East or a Nigerian meltdown play into the hands of oil speculators. Oil was around $90 a barrel until the second quantitative easing plan (QE2) started to fail the Fed had in place. The whole plan might change in June when the QE2 ends. This might end up leaving crude oil around $85 to $95 a barrel total.

Articles cited

Wall Street Journal

online.wsj.com/article/BT-CO-20110408-707562.html

New York Times

nytimes.com/2011/04/09/business/09markets.html?partner=rss&emc=rss

Industrial Fuels and Power

ifandp.com/article/0010617.html

Fortune

finance.fortune.cnn.com/2011/04/08/oil-at-the-tipping-point/