$1.77

That is the price of gas at this moment in Des Moines IA.

We paid $4.03 a gallon in Chicago a month ago when we saw Tina Turner in concert (fabu).

Oil went from trading at $148/barrel in July to yesterday's close of $62/barrel.

Remember all summer when the marketplace said that oil was set to trade at $100/barrel forever? This was due to supply and demand issues and that this was not a speculative event, rather that the paradigm had shifted and we were past the halfway point (hence the amount of oil left for extraction was less than that that had already been extracted). The WSJ had a practical tantrum about speculation - it was almost insulted that anyone dare suggest the marketplace was not showing the true price of oil.

Speculation - Never!


Well the housing market starts it's slide this summer and then the defaults begin to unwind in the banking sector. Stocks immediately start to tank and the margin calls start - and magically, the price of oil drops precipitously. To the tune of almost 90 dollars in a quarter.

Interstingly - the WSJ had a series of stories a few weeks back outlining how stock traders were selling their oil futures (lucratively) to get cash to shore up their stock positions. They asked experts to predict where oil would bottom out at and it was somewhere between 50 and 60 bucks. If you look at the price of oil lately, it has indeed been bouncing just above the 60 dollar mark. And the authors included in their articles that it was a combination of speculation and supply/demand that drove the price of oil to stratospheric heights. Also interesting was that Goldman Sachs had projected (in Spring) the price of oil would be around $150/barrel. Being prescient is not the same as rigging the market.

So it looks like now that speculation has been removed from the oil trading pits - prices will bounce around for a bit and then drift upwards as the economy stabilizes. What I've been reading is that prices will stabilize somewhere around half of their July highs, or $75. This translates into $2.00-$2.50 (depending upon taxes in your state) for a gallon of gas.

The massive tax break the Americans need now - keep gas prices out of the hands of speculators.