Oil price drop number is misleading

Thanks for finally making a point in your last paragraph. As a rule of thumb, its usually better to do that up front so we can follow your logic throughout the rest of your writing.

You say "the fact that these costs have come down is purely relative". Well, duh. I get the sense that a 20% easing of oil prices from its high is not a big deal. I think that is silly. The airlines would certainly disagree. But, I do agree that $125/bbl oil is not a big enough drop to get us out of th woods.

Personally, I'm in the camp that oil will be under $100/bbl by January. The recent run-up just doesn't align with historic precedent. I'll start to worry when "big oil" starts making huge investments in alternative energies, because until then, how they spend their investment dollars indicates that they still think oil is the most cost efficient way to supply energy demands. When they stop believing that, you can bet your britches that their spending habits will change dramatically.

Chris

The decline in oil prices in July appears to be directly related to the strengthening of the dollar vs. the Euro and other foreign currencies. The Federal Reserve has positioned the U.S. money market well to take advantage of the long anticipated mild inflationary cycle. I predict the price of oil will drop to near $100/barrel by the end of this year, and the average price of gas in the U.S. will fall just below $3.50/gallon. Not particularly comforting to those of us who remember $50/barrel oil, but significantly better than the rest of the developed world will see.

I hope all of us contact Congress about serious investigations into oil speculation, as the airlines pleaded for recently.

Worried about this, I believe the oil companies and their friends had much more to do with the drop than Bush's jawboning about more oil drilling. Kudlow of CNBC, and other conservative's give him the credit naturally but that makes absolutely no sense considering the 7-10 year time frame.

[As Pickens and others point out, we can and must move away from fossils fuels as soon as possible; if the US suddenly made thousands of Liberty ships and aircraft for World War 2 we can certainly FOCUS on energy and become much stronger and independent within 10 years or less ! We went to the moon rather quickly with far less technology, so it can be done.]

Likewise the greater demand from India, China, etc. has been steady but not wild, it did not jump 50%+ in one year, so that also is suspect.

But speculation has climbed rapidly over the last few years, with a predictable frenzy lately [like the famous case of tulips in Holland about 300 years ago, selling for crazy prices before falling.] When this wild leveraging is allowed it let's a relative few have excessive influence.

Just as reasonable regulation of banks, insurance, airlines, etc. is necessary for stability and public trust [and the long term strength of those fields], it should also apply to speculation.