Oil drops $15/barrel in last 3 days.

[ZacFields]

For those who haven't heard or don't pay attention to investments and such, the price of a barrel of crude oil has dropped by over $15/barrel in the last 3 days. This is the largest ever 3-day decline in oil prices.

It's hard to say what tomorrow will bring. Perhaps it will drop another $5 per barrel, and maybe $30 per barrel next week. On the other end, it could rise by $12 per barrel and get almost back to where we were 3 days ago.

To most of America, this is an exciting development. Mexico is locking in oil futures contracts at today's prices for many years to come, demand is down, supply is up, and OPEC is at least making marginal strides to increase production.

My take on this: I'm happy that we're seeing some decline, but worried that our government won't seize this opportunity to continue to wean American's off of foreign oil.

What do I mean by that? If gas prices dropped from their prices today (I think about $3.90) down to, say, $2.75, what do you think American's will do? They're going to go back to the dealerships and buy back their old SUVs and ditch the new gas-friendly car that they recently purchased. They're going to quit taking mass-transit, quit riding their bikes to work, and go right back to what they were doing back when the gas was $2.75.

In which case, we'll just end up back where we started.

One idea that I thought would be fantastic would be to put a tax on gas that locks it into today's prices (even as the cost of oil declines, if it continues to do so). Then, every month they can ease up on the taxes very slightly. I think a good number would be 3 to 5 cents per month. The taxes that are taken in could be used to give grants to businesses who have made strides with alternative energies, help cities with mass public transit systems (like a monorail or train going from Iowa City to Cedar Rapids), and repair roads/create new and more efficient roads.

This plan would be outstanding because it would help to continue curbing our demand for oil, which would in turn allow us to SUSTAIN lower gas prices and at the same time pave the way for new renewable alternative energy solutions. It would also be nice to have the peace of mind knowing that every month, gas will go down by 3 to 5 cents rather than going up and down like a rollercoaster.

That's just my 2 cents. Take it or leave it! :)

[Scott]

If gas gets cheaper and you add tax to it to bring the prices to the same they are now, why would they lower taxes every month??? They're getting our money already and I guess I just dont see a reason for them to lower the taxes, if they were to raise them.

[TbTalon94]

ZAC FOR PRESIDENT!!!

I agree with what you said about people going back to what they were doing before. You can gurantee if gas dropped down people will say "oh well gas is cheap now so lets go drive around all day in our SUV, and blah blah". America is stupid, end of story.

[Scott]

you cant honestly tell me if gas goes down to 2.75 that you wouldnt drive more than you do right now..

[TbTalon94]

No not really. I never drove that much prior to the gas rise, so I didn't really change my habits other then trying to keep up on maintenance to increase gas meilage. I live 7miles from work and live very close to town. I also already drove a vehicle that got 20+ mpg.

[Scott]

yeah I guess your more conservative than me since I have a car that gets about 6 mpg "I fit in the stupid American category I guess" I mean that idea of gas prices MIGHT be a good idea IF they would actually lower the tax like your saying. If I remember right the 1.00 a pack cigarette tax was supposed to be temporary as well... I think with how the high gas prices have such a negative affect on SOO many different things right now we need as much of a break as we can get. Look at truck drivers, anyone who drives a truck with a trailer like hauling race cars to the track, familys taking vacations, many things have been hit hard by the gas prices lately. The attendance at almost every racing/sporting event including nascar, which has the largest fan base of any sport is rapidly declining. I would say give americans a break and drill some damn refinery's in the ocean and get some american oil for us to burn

[TbTalon94]

I wasn't saying America was stupid for driving gas guzzlers. I was saying America is stupid because they don't understand how the economy works. Suppl and Demand just doesn't register with some people, it's rediculous.

[ZacFields]

I don't know so much about "them" but I was more referring to this plan I thought up. The whole point would be to sustain gas at the price that it is at now, and very slowly lower it from month to month likely for a couple years at least.

The great thing about gas prices if they were to remain how they are now *and not go any higher* is that it wouldn't take American's very long to adjust their habits (or budgets) to accomodate the gas prices. Even truckers would catch themselves up by charging slightly higher rates or purchasing more fuel-efficient trucks.

I'm like you, Trevor. I drive a car that gets decent gas mileage (around 30mpg) and I don't drive very much at all... never did. This gas crunch probably hurts guys like us more than anyone, because we already were limiting our gas usage before this came up. I had myself budgeted for "X" amount of gas every month and I had my other money budgeted for other things. Each month, I've now got to notch my gas budget up by $10 or $15ish, and that money has to come out of other things like our entertainment budget. I just can't really increase my fuel economy very much right now. I ride my motorcycle to work as much as possible, but outside of that I'm all out of ideas. Hybrids aren't in my price range right now.

It would be nice (IMO) for our government to set up a system that would allow us to assure (to a reasonable extent) that our gas prices would get lower every month for an indefinite amount of time. It would also be nice to see some consistancy with our gas prices as well. This wouldn't hurt us to bad if the prices weren't constantly inflating on a weekly basis.

[DustinsDuster]

im kindof curious how long it will be between the price drop on crude and the price actually dropping at the pumps. its pretty much been a week since crude prices dropped, and the price at the pump has only dropped two cents a gallon...

[ZacFields]

I don't know for sure Dustin, but I think I remember reading that it can take as much as a month. It's the time it takes for the barrels of crude (at today's price) to be shipped to the US, refined, and then delivered to our gas stations. I want to say it takes a month or more sometimes.

As an update, crude did drop another 41 cents on Friday, so the 4-day drop has been about $16 per barrel and I believe the current price is the lowest in about 2 months, which doesn't say much, but it's a welcome drop nonetheless.

Another reason the gas tax may need to be raised is due to a lack of funding for our roads and mass-transit systems. Apparently the US highway trust is at a critical level.

http://money.cnn.com/2008/07/19/news/ec ... 2008071910 (http://money.cnn.com/2008/07/19/news/economy/gastax.ap/index.htm?postversion=2008071910)

This is another reason why I would suggest raising the taxes at a fairly liberal level to sustain gas prices even if they start to decline and then lower them over time. The sudden spike in tax revenues should jolt the highway trust fund back to comfortable levels and maybe even provide enough money to build some better public transit systems for America.

I am republican and normally wouldn't support a tax hike of any kind.... I think I've ranted about this many times. BUT, this is a tax hike to which the money goes to a fund that has less ability to be screwed up by congress because it has a specific purpose (roads and mass transit).

I'd really like to see something like this happen. Immediate relief from the gas crisis would be great, but I'd be more excited to know that sustained long-term relief is assured, and I think something like this would make it possible, all the while allowing us to triple or quadruple our mass-transit capabilities, build roads that are more direct (thus easier on the pocketbook for gas) and repair roads that are damaging our vehicles.

peace.

unfortuatnly, you hear about oil prices going up, and the next day the gas prices are up. No matter if that isn't the oil that was being sold at the higher price. But to go down, it the oppsite way. Funny how that works, lol.

[melhoneybee]

That was me forgetting to log in sorry.

[96-eclipse-gst]

I am also unfortunate, I drive a car that gets between 25-30 mpg and I live maybe 2-3 miles from work. All my shopping is practically across the street. I try to find things to do at home instead of going out. Jenn and I have netflix so we usually stay home and watch movies alot. We just went to the movie theatre to see "The Dark Knight" and the movie theatre isn't even a block away. On the other hand, she took a job across town. She was working at the at&t store on 1st ave by best buy. When the higher ups asked her to open their west side store and get it up and running. So now instead of driving 5 mins to work. She drives 10-20 mins to work everyday. Oh well, I guess its better than her taking the manager job in Iowa City. Now that would've sucked. Oh and instead of Zac for president. How about Zac for presidential advisor. They are the one's writing up the bills and ideas. Does anyone really think that our presidents actually come up with an idea....?

[on a budget]

Let me just start out by saying bush is a peice of shit it isnt hard to tell...

and politicians are always looking at there pockets...

now you cant tell me a guy from a oil state such as texas with as much power as he has doesnt have connections too the oil industry...as a matter of fact his vice president use to be an owner of a oil company...in my opinion bush has alot too do with the prices...and now that were less then a year away from the ending of his presidency the prices are starting to decline and bush has a commitee thats "investgating" the outragous prices...i smell bullshit...and what makes things even more fishier is he wanted to appoint his personal lawyer as head of the supreme court...(im not sure its head of the supreme court, but some position thats very powerful)

[ZacFields]

For those still listening in:

The current drop in oil prices over the last few weeks is now about $20.00. I have been particularly impressed with crude's resistance to increases in price. Some days, it goes up by $2.50, and then the very next day it will go down $4.00.

If you want my un-educated opinion, from an investors point of view it seems like the investors who are investing in crude oil are running scared. They are bailing out by the thousands, but with the beginning of hurricane season upon us, there are a lot of investors standing their ground because they're hoping a hurricane smacks into the US again so they can get out of the oil market at an inflated price.

My target price for oil by Christmas of this year: $95.00 per barrell. The only reason it isn't reaching that point right now is because of the summer driving season and hurricane season. I think the investors know they have been walking on egg shells for at least 6 months and after hurricane season it will be time to bail out until oil reaches a more appropriate price. Some of the more aggressive analysts are targeting about $75-$80/barrell for the indefinite future. Bad news for oil investors.

[ZacFields]

Another update, oil settled down another $1.24 to $113.77 per barrell today. Again, the high was about $147.00 per barrel, so we're currently down over $33 per barrell off of the high. As I drove to the store today, I noticed gas prices as low as $3.59 per gallon. I never thought I'd be saying that $3.59 was an awesome price, but unfortunately it is right now considering where we've been.

I still believe $3.50 is about as much as Americans are willing to pay without severely changing their habits. Me personally, I started way back when it was around $2.50 or $2.75. Then again, I don't have the social life that most have so it was pretty easy for me to say no to driving my car with only slightly inflated prices.

I will keep you all updated as more thresholds are crossed.

[slobalt]

I've been watching this too, oil prices dropping, gold is dropping, the dollar is on the rebound, whats going on??? I smell conspiricy, lol. Just when my portfolio is where I want it.... boom.... something happens and I've got to rethink some things. I shoulda went into finance so I could be watching this more closely.

On another note, I can't believe we're wowing over 3.59 gas. Not a scant 18 months ago we were at almost at 2.00 before things began getting out of hand. Oh well at least my gas card wil be cheaper this month.