For the past couple of days I've been trying to figure out if I thought the report I read on Friday about gas being 3 bucks a gallon by the end of summer could be true. Even though I've said time after time that gas would never hit 5 bucks a gallon, this report shocked me. I expected a decline. Just not like this. Not this fast. And I never thought it would touch 3 bucks again.
Even though I was betting on deflation more - I would have given even odds I was wrong and the inflationists were right. If gas prices hadn't choked off the early year enthusiasm, I think we could have seen a more inflationary environment. But Wall Street walked the price up too fast, and people couldn't adapt because their wages hadn't risen enough.
A couple of days ago Mr S. and I were talking about the report when he said - when President Money Bags first took office gas was around 2.35 a gallon. Oh yeah - I replied. After I thought about it more, I remembered this was at a time when we were going through massive deflation. Which is what I've been worried about the whole year. Collapsing prices. I mean, with what is going on in Europe, how can you not expect prices and demand will collapse? Huge swaths of Europe are sitting at almost 25% unemployment.
But, there shouldn't be anyone alive that doesn't like low gas prices. Right? It's like money from heaven. The cost of everything goes down. However, so do wages. When we were in deflation, pretty much everyone in the valley was taking temporary pay cuts.
This also makes Government Money Bags feel the need to print money to keep their target inflation goals. And remember, when we were in deflation - China stepped up to buy a bunch of our debt. I doubt China will be there this time as the lender of last resort. They are busy lying about their own economy. I mean, when you read that coal is stacking up over there - it makes you a little nervous. Especially when I see an increased drum beat that a new recession will start in the fall. Coincidentally when gas prices are suppose to be urber low.
I hadn't really looked at the oil
inventories in a while, because I'd given up thinking rising inventories had any affect on the price. I mean, I can count on one hand how many times the whole year inventories have fallen. But I guess the excess just got so great, they couldn't keep ramping it up.
The other thing I finding interesting is - for all the reduction in gas prices - I don't see the freeways that full on the weekends. Which is disposable travel time. As a matter of a fact, this weekend I was all over The Valley, and was pretty shocked at how empty the freeways and roads were.
US crude oil inventories rise by 2.9m barrels - June 25 2012
US crude oil inventories
fall 0.2m barrels - June 13, 2012
US crude oil inventories
fall 0.1m barrels - June 6, 2012
US crude oil inventories rise by 2.2m barrels - May 31, 2012
US crude oil inventories rise by 0.9m barrels - May 23, 2012
US crude oil inventories rise by 2.1m barrels - May 16, 2012
US crude oil inventories rise by 3.7m barrels - May 9, 2012
US crude oil inventories rise by 4.0m barrels - April 25, 2012
US crude oil inventories rise by 3.9m barrels - April 18, 2012
US crude oil inventories rise by 2.8m barrels - April 11, 2012
US crude oil inventories rise by 7.1m barrels - March 28, 2012