Over the past 6 weeks crude oil prices have steeply declined, resulting in a drastic lowering effect on the price of gasoline at the pump. West Texas Intermediate (WTI) dropped from more than $105 on the first of last month to less than $96 today. In the same period wholesale gas dropped from $3.07 to $2.67, saving consumers $.40 per gallon when they fill up their tanks (See graphs below). That equates to $7 & change per tank of gas for the average consumer, or a minimum of about $400 per year. When extrapolated out to businesses who service the public with the likes of food, travel, lodging, etc., the average consumer would save thousands of dollars per year. So what’s behind this sudden windfall for consumers?
Here’s a headline from CNBC yesterday: Some investors think oil’s run is done. Think about how powerful that headline is. Better yet, think about what that means. Those remarks are from Stephen Schork, one of the level-headed Wall Streeter’s who doesn’t attempt to hide what’s going on. That headline becomes even more powerful when you consider this one: Oil prices defy global turmoil. In spite of what’s happening in Iraq, Iran, Syria, Libya and other oil-rich Middle Eastern and Far East countries, oil prices are not going up — a pretty significant point when you consider that in the past oil prices would spike by as much as two or three dollars when someone in those country’s sneezed.
But there’s one other thing that’s happening which is affecting oil prices: Still to come? Pain from Fed’s ‘taper’ dismount. What does that mean, you ask? In a nutshell, it means that Wall Street is scared that their bestest BFF – the Federal Reserve – is about to stop investing America’s money in them.
This all adds up to what I have been saying for years, as well as others: The greedy bastards on Wall Street are responsible for a huge chunk of the price of a gallon of gasoline, throwing ordinary commoner’s into financial stress while they add billions more to their already billionaire status.
So if Wall Street is giving up on oil, where will they now invest all those billions? Get ready — it’s your drinking water.