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Gas could fall to $2 if Congress acts, analysts say

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The price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy-futures markets, four energy analysts told Congress on Monday.

Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.

Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters' assessment at a hearing on proposed legislation to limit speculation in futures markets.

Krapels said that it wouldn't even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in futures markets.

"Record oil prices are inflated by speculation and not justified by market fundamentals," according to Gheit. "Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel."

Futures trading in London has not been a major factor in rising oil prices, testified Sir Bob Reid, chairman of the Chairman of London-based ICE Futures Europe. Rising prices are largely a function of fundamental supply and demand, not manipulation or speculation, he said.

"Energy speculation has become a growth industry and it is time for the government to intervene," said Rep. John Dingell, D-Mich., chairman of the full committee. "We need to consider a full range of options to counter this rapacious speculation." It was Dingell's strongest statement yet on the role of speculators.

cont.
maasanova

111 responses // Gas could fall to $2 if Congress acts, analysts say

  • They are not going to do anything because its not in their own intrest. Whats the difference if a tank of gas is 80 instead of 40 if you make a million dollars a year.
    clayjj05
  • $2.00 a gallon is too expensive. The oil companies have us paying so much for gas now, that they make us think $2.00 is a good price for a gallon of gas. I am thinking $1.50 a gallon, at the most, would be appropriate.
    mjsmith11
    5 responses to this
  • We should make the oil companies operate at a cost until an equivalent dollar amount to that they've ripped us off for is returned to Americans and others around the world. Won't that be nice!?

    Consider how the Ripusofficans, mcSame and others have manipulated some Americans into thinking we needed to compromise out coast lines and wilderness areas to drill for oil based upon a FAKE shortage of oil relative to demand. Not cool.

    If they don't check themselves - inevitably, reality will do it for them and it ain't gonna be so pretty.

    We owe thanks to Dianne Feinstein for looking into this issue of big oil and big money speculators running amok - Enron style!
    recommended by  Marilynn_Murray, Conniepae
    VoyagerFilms
    3 responses to this
  • I don't think you understand yoyager, but this is a free market, and we should not make oil companies operate at cost. If we make the american companies operate at cost, which practically produce nothing, do we make saudi, Canada, and Venezuela companies operate at cost? Is that possible?

    Ignorant statement

    the cost of gas sucks, YES but congress can't and won't do anything.
    Ride a bike like the rest, that way we don't have to read your ignorant comments.
    Oil does not care about your politics
    GOD BLESS BIG OIL
    mrburns
    3 responses to this
  • I'm agreeing with you on this one, mj. The speculators envisioned $4 gas over a year ago...I know some one who was in the futures market. When he told me that, I answered, "not possible" yet, here we are over a year later, exactly when they said it would occur...

    Those who stand to gain by all of this would lead us to believe that it's due to supply and demand, so as to get more drilling rights...but that's not true...they're sitting on thousands of drilling permits already...and holding firmly onto the closed taps of wells they do have...

    Part of the higher price is, sadly, probably due to the devaluation of the dollar...
    PlatoTacius
    2 responses to this
  • voyager is the most biased human being alive
    clayjj05
    1 response to this
  • We all have to deal with the free market. Sometimes its harsh but sometimes it gives you a shot at big success. You know when people go after companies it is a losing battle. They are non entities. You have to look at the shareholders. Everyday people who own stock and want results. They push the direction of these companies and operating at cost will never happen. We all have to take some responsibility in this. I wouldn't ask God to Bless Big oil as that is just a typical ruse of people who can't make educated argument or debate, but there is more benefit to the system than there is wrong.
    Speculators are obviously working the system and it needs regulation.
    Also, I cannot help but feeling ok about the gas prices, we are spoiled here in the states. People do need to use thier cars less and now they finally have to. Americans always get creative when things get tight and I look forward to all the small and large business innovations that will be a result of this.
    eggsdenison
    1 response to this
  • watch this comment being used here, here and here
    This is exactly what King Faud was talking about when he announced meager increases in production of crude. He was trying to tell the American people in a polite way, without outright pissing off the Financiers making a killing on the futures market; the price of gas is artificially inflated and not due to supply and demand forces.

    Demand has actually gone down because the price has gone up as more people are turning to alternate modes of transportation that don't involve oil.

    This whole game is going to backfire on the financiers when electric cars take a hold of the free market system and take over places like China and India, the oil producers will be crying to sell their crude.
    recommended by  Marilynn_Murray
    jubal
    3 responses to this
  • i agree with Platotacius...

    the diminishing value of the dollar does play a part in the high gas prices...

    so much other stuff we can say about the gas prices, but most of it is speculation and conjecture...what we do know is the prices are high as hell and they don't have to be...
    tiambers
  • I doubt the extra cost of speculation is anywhere close to the amount of hidden costs we pay in taxes that go towards subsidies and the military budget (which goes largely to maintaining control of oil markets). We spend billions on keeping the Saudi, Egyptian, Jordanian, Israeli, Turkish, and other regional powers either in power or in line. And all of that is just the financial cost, not the ecological or geo-political costs that we get with terrorism and global warming.
    Brendan_M
    1 response to this
  • watch this comment being used here, here, here and here
    Wasn't it the oil companies that originally said it was speculation? Should we really believe them so easily?

    I think this whole thing is just a bait and switch by the oil companies trying to distract us from a capital gains tax bill that would rebalance the economic system, because they don't want to give up some money.
    electricsquiral
    1 response to this
  • this is a good discussion. while speculation generally wreaks havoc on society (asian financial crisis), we do have to remember that oil is a finite resource and the majority of it is controlled by a cartel. regulating speculation definitely needs to happen, but the price will only drop as low as the suppliers allow. right now the price is artificially inflated several times over--by the suppliers, the speculators, and the refining companies.

    i also believe that high prices aren't all bad if it causes renewable energy or reduced consumption. take note though that's not a certainty--more drilling or taking (even) more than our fair share could also happen, along with the social and political and environmental consequences of that. the power is always in the hands of the wealthy and if they have to make up for higher production and transportation costs by paying lower wages or making inferior products, that's what we can expect to see. the change has to come from refusing the consumer culture that's been forced upon us.

    international political economy class is highly recc'd to anyone interested in these issues.
    tonality
  • I so hope this is not true. The four dollars plus price for gas is kind of a dream come true. I've been trying to reduce my carbon footprint for a decade now, and that the whole country is trying to do the same thing as I is a perfect delight. So MUCH information is flowing now regarding green and alternative energy that it is almost exhilarating. I figure I must have about 40 yrs more to live. Maybe I will live to see a carbon-negative America.

    The price of gas: May it rise!
    pablomelendez
    5 responses to this
  • They haven't capped it before, what's going to make to make them hop to it now? The more people become demoralized, the easier to feed the crap; why let sleeping Americans awake when they are so malleable while in slumber?
    ReddFeary83
  • .........imagine this if you will, Just a mere 3 years ago, gas was at a $1.41 a gallon. Is that the time of "The Good Ole Days?"
    tmaster
  • Not getting too excited yet.. Subject of the post is "if congress acts". enough said
    gruven_reuven
    2 responses to this
  • All of a sudden it is because of 'oil speculation?' And how sad we have to rely on Congress to run our lives. If 'they' act we can have $2 gas to run OUR cars... yeah, land of the free. I agree... don't get too excited, because the one thing Congress never does is act... at least not in our best interests. So tired of being twisted in the wind by these political maneuvers. And wonderful... should we get that $2 I suppose it is back to business as usual regarding alternate energy sources... what bs.
    JanforGore
  • STAY AWAY FROM OIL PEOPLE. OUR PLANET IS POLUTED BECAUSE OF THE OIL WE USE ALREADY. WHAT WOULD HAPPEN IF THERE WERE MORE OF IT? MORE DIRT MAKES THINGS MORE DIRTY.

    SOLAR! SOLAR! SOLAR! SOLAR! SOLAR!

    WE NEED TO STOP WASTING OUR TIME ON NONSENSE. WE ARE SMARTER THAN THIS.
    danitassin
    1 response to this
  • WE SHOULD PUT THIS POD RIGHT UP NEXT TO THE POD THAT SAYS "HOW STUPID ARE AMERICANS?"
    danitassin
  • Speculation and BOOM it rises.

    Feelings cost a lot.
    J_Jammer
  • I thought this got picked for TV and now its not. Whats up with that? It was on the home page and now its not. Glitch maybe?
    jubal
    1 response to this
  • Actually the right price for a gallon is far higher than 2$ or even the current 4$!

    The price of a product should always reflect its costs. If it does not, the product is in some way subsidized (which breaks the free market and drives competing products ou of it). Currently the price for oil only refects its production costs (getting it out of the earth), but not its environmental costs (which are a lot higher). These environmental costs are not paid by the consumers of the oil (= citizens of industrialized countries), but by everybody. This is called subsidizing.

    By subsidizing oil, you give it an advantage over its direct competition (like renewable energies).
    peter_doerrie
  • Profits in the billions doesn't reflect what you're stating nor justify it.
    J_Jammer
    3 responses to this
  • Everyone, say hello to the newest third world country.
    The United States of America. Ride scooters and bikes walk and run. Don't drink the water. Don't breath the air. The food is imported and probably contaminated but that's ok because we don't even know where it comes from.
    Let's just change our language also.
    GoodGodGuy
  • ok, $2 gas would be nice, but lets not get distracted. I'm worried that if gas prices go down people will forget about other possibilities! we need to break up with gas and move on! there are other fish in the see!
    blue_blooded
    1 response to this
  • I personally think it is more about "war speculation" than anything. There isn't a day that goes by that we don't see a story about Bush planning to attack Iran, or Israel running maneuvers, or countries stating Iran's nuclear program will not be tolerated. And even rhetoric about it from Ahmadenijad who I am sure also benefits from oil. So, is the Iran propaganda real, or is this all part of a "war speculation" mind game to raise the price of gas and oil? Oil speculation is ensuing from the war speculation, which may be accurate but nevertheless is a big part of why we are seeing the prices we are seeing now.

    This is why we need to push for SOLAR energy and a total revision of our Middle Eastern foreign pollicy that includes Israel. If they wish to remain in that region with nukes they will have to understand that the countries around them will want them for defense. You cannot have peace in the Middle East with halfway measures, and our current policy is affecting the lives of Americans and others around the world and it is time for a real change. Hear that, Obama and McCain?
    JanforGore
  • I actually dont know why you are freaking out about 4$. Have a look around in the world. Here in Germany its billing at 9.20$/Gal ...
    Oh and we pay more taxes too.
    peter_doerrie
  • Am I the only one who is perfectly fine with oil prices being so high? It's causing people to reevaluate their lifestyles and spending choices. I say push it to 150 a barrel.
    You push someone's face to the flames and they will workout a way to escape. i.e. motor innovation.
    StuntBunny
  • I also have mixed feelings about this whole thing. I agree that laws should limit how much speculators can rip off the consumers -- but I also think we have GOT to get out of the dependency on the Middle East -- and high gas prices seems to be the best motivator so far.

    On the other hand, something does need to be done to ensure fairness -- I wouldn't want the speculators to simply switch from speculation in oil to speculation in solar, and drive up the prices of that!!
    shelchak
  • This is all part of having a free market...all this talk about limiting speculation and forcing the companies to operate at cost is a move away from a free and capitalist market, and we've all seen how well socialism works.

    Speculation and trading is how people make money. And if you were the one profiting off of it, you wouldn't be complaining. If it was really such a problem for you, you would change your lifestyle or work to come up with a solution to the problem...that's how a free market operates. We as a country have become too used to the government implementing "solutions" for us, that we've forgotten how to solve our own problems.
    millerke
    1 response to this
  • http://current.com/items/89044475_bush_energy_plan_get_...
    Key word: Could.

    How about funding a different source of energy, say something that we could build upon in the future?
    drewsuf721
  • Yeah, and pigs can fly.
    Neghie
  • Although this analyst's reasoning is good for thousands of americans... giving them hope that perhaps some day gas prices will lower... I highly doubt this. I say this because for one... I am a business major so I understand how the free market works and two... this is all based on the economy.

    Like some people have said, the free market offers good and bad things. What we need to consider is, how will our economy operate if the government steps in and limits this so called free market? I understand that there is corruption everywhere, but we need a smarter approach to this issue. Actually, we need a smarter approach in all the other issues.

    I would love to see $2/gallon gas but then again I don't. why? because these high gas prices forces people to stop consuming more gas. Also, it motivates companies to become more innovative and give us alternative ways for transportation.

    I don't support seeing the government having too much power because again... our government is also corrupted and they have interests. What we need to do is unite as a country and to try find a medium between laws and regulations. We need a free market but then again we should not let these big companies have full control of what goes on in our country. I am not too fond of those so called "speculators." How are we to know that those speculations they portray are for the benefit of our free market? They know they are the ones who are driving prices up.

    My two cents.
    omordn
  • If this is true I'm sure the big five will start pouring millions into both houses to make sure that legislation that would hurt their profits won't pass. Until you take money out of lobbying you won't see legislation that really hurts big business. Case and point look at what has changed the minds of 94 democrats on the FISA bill... http://www.politico.com/blogs/thecrypt/0608/Dems_who_fl...
    osiris326
  • I'm disgusted with one of the comments left in the Marketwatch article:

    "Speculation is the root of Capitalism"

    Yes, and greed easily becomes the root of both when things are not kept in check. Look at Major League Baseball which tries to survive with a Darwinism Natural-selection process of only the rich teams being able to compete for playoff positions. The economics of the other teams might be hurt by the Savage Capitalism antics of the Yankees, Red Sox and other teams with great revenue streams -- but who gives a damn if someone else is hurt at your own profit.

    It's a boom time for commodities traders but it's hurting the United States economy. Yes, we want to continue to encourage conservation and energy innovation (raising the federal gas tax would be a good option) but at this point -- with America's economy in a nose dive with thanks to this speculation -- it would be better to stop it in order to prevent further economic disaster.