Gas at the Pump

A HingeFire survey early this summer asked readers about the projected price of gas at the pump on August 1st. The results showed the following:

Over $4.50 23%
Between $4.00 and $4.50 43%
Between $3.50 and $4.00 17%
Between $3.00 and $3.50 13%
Below $3.00 2%

The actual nationwide average price was $3.84 at the beginning of August. Congrats to the 17% who selected the $3.50 to $4.00 price range (I actually believed it would be above $4.00).

The good news for consumers at the pump is that it appears that the short term speculative bubble associated with oil has burst over the past couple of weeks. This will help both the market and your wallet when filling up the tank. As a note, 68% of readers in the most recent HingeFire survey believed that oil was in a speculative bubble. At this point, many analysts would say this perspective is correct.

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The Gold prediction

A few months back we held a survey regarding the expected price of Gold on July 1st. The results were as follows:

Above $1100 24%
Between $1000 and $1100 24%
Between $900 and $1000 22%
Between $800 and $900 15%
Below $800 15%

The actual price of gold on July 1st was around $937. Congrats to the 22% of poll takers that correctly predicted the $900 to $1000 price range.

Since the start of July, gold has been looking bit toppy as if the momentum has disappeared in the market for this precious metal. It sunk to near $916 before staging a rebound in the past couple of days. This may be setting the stage for the next leg of the run up, however it is more likely a small bounce before further downward action. The next few weeks will be interesting to watch in this market.

Is Oil in a speculative bubble?

Oil continues to trend upward with some pull-backs. It is an open question if the increases merely reflect a speculative bubble, or is indicative of real supply and demand.

Take the new survey at the top left of the blog to voice your opinion.

One interesting regulatory change over the past couple of weeks is the tripling of margin requirements at the energy exchanges. The New York Mercantile Exchange (Nymex) and ICE Futures Europe in London have boosted the margin required by speculators to make trades. The exchanges are hoping that the margin calls will reduce volatility and keep the lid on speculative price increases in the energy markets. On the day the changes were implemented, oil dropped by more than $7. Since this time however, the price has recovered to near $130.

A number of officials such as U.S. Treasury Secretary Henry Paulson have stated that high oil prices are here to stay, and are reflective of the world supply and demand situation. Jim Rogers agrees, stating that the oil bull market has years to go.

Other sources state that oil is in a classic bubble. No different than houses, dotcoms or tulips. The article in The Times makes the case that the oil price increases are not attached to reality, and outlines the case with some compelling numbers.

This leaves the question. Is oil in a speculative bubble that will pop before the end of 2008? Or do the price increases have years to go?

One truth is that bubbles always tend to go on longer than any pessimist ever believes it can; and eventually crashes harder than any optimist ever believed was possible.


The last survey – Gas at the Pump

The last survey on the price of gas at the pump showed that 43% of the poll takers expected gasoline to be between $4 and $4.50 per gallon on August 1st. 67% of the responders expected gas to be above $4 per gallon.