The Roller Coaster Ride Continues


Have you enjoyed the falloff in fuel prices? I sure have. When you look at both mine and my wife’s cars, I figure I’m spending about $60 or $70 dollars per week less than I was spending six months ago. You guys who drive a truck from job to job or have a fleet of trucks out on the road every day must feel like you’ve received a Christmas bonus.

So, what happened, and will it continue?

To be sure, people started conserving more—which lowers demand, which lowers prices—but you can’t give the slightly lower demand credit for such a huge decrease at the pump.

I think one of the main reasons fuel prices came down so far and so fast was because the market speculators moved from playing with fuel prices to playing with regular stocks. The falling of fuel prices and the crashing of the financial pyramid scheme that was the mortgage industry—and more importantly, the crushing effect the collapse had on the stock markets—happened simultaneously. When the sharks making a killing on speculating in the fuel commodities market saw the panic that was happening, they all migrated over to where the new big money opportunity was—stocks.

There’s nothing that a market speculator loves more than wide-scale panic. With the news media wringing their hands about the stock market in the days leading up to, and following, the presidential election, thousands of investors did the dumb thing—they sold low. Afraid of losing all of their nest eggs, many investors took themselves out of the stock market. Add to that the effects of electronic trading, and you had a sell-off that is a speculator’s dream. The stocks of perfectly good, financially sound, blue chip companies started falling, along with the troubled financial sector stocks, as millions of Americans were scared out of the market. Smelling the blood in the financial waters, the same sharks who helped drive our fuel prices up over $4 a gallon switched over to gobbling up large amounts of stocks in other sectors at—in some cases—pennies on the dollar.

Whether that activity will have stabilized the stock market by the time you read this is anybody’s guess. I hope so. My 401(k) could use the rest.

So, what about fuel? Does that mean you can all enter 2009 with some sense of knowing what your fuel costs will be? Not so fast. Enter the Russians.

I’m reading now (remember, I’m writing this before Christmas) that not only is OPEC cutting production, but the Russians, concerned with the falling price of fuel, are thinking about a strategic relationship with the OPEC nations. Simply stated, Russia, the second largest producer of oil in the world, is considering working with OPEC to fix the price of oil.

With the historic (and recently increasing) proclivity of the Russian government to act out of pure paranoia, it remains to be seen whether they can work with the Arab oil producers, some of the slickest business people in the world (you have to be pretty slick to hold the most powerful nation in the world and one of your biggest customers on a leash for over 30 years, which is exactly what OPEC has done to the U.S. since the Carter administration).

So, what does all this mean to you, driving your truck full of equipment and all over town? My advice is don’t get too comfortable with $1.75 a gallon gas. If the Russians and the OPEC nations get into a pissing contest, we might just luck out. (If we could figure some way to get that whack-job Chavez down in Venezuela to stick his nose into the deal, we might see prices fall to record lows!)

If the Russians and OPEC start acting like best friends, watch out. We could be back on the roller coaster by spring, and next summer might make us yearn for the prices we were paying this past summer.