Three months ago all I heard was speculators this and speculators that.  Every financial news program I watched on a daily basis went out of their way to include the phrase “oil speculator” just to get a rise out of us.

And most people lapped it up like crazy!  Especially when it spilled over to the 6 o’clock news.  My own friends and family included.

Now that the cost of oil has dropped 31% from $147 to a current price of $101, have you heard much about oil speculators lately?

Probably not!

Why haven’t gas prices fallen?

I’m sorry to say, contrary to popular belief, that the price of light sweet crude is one of many factors that influence the price of a gallon of gas.

Take for example, the surge in gas prices when a few massive hurricanes take a leisurely stroll through the Gulf of Mexico.  A large percentage of the United States’ crude oil refineries are located in the gulf states, and shutting them down for extended periods of time due to inclement weather will certainly influence our gas stockpiles.

This reality is hitting many people in the southeastern U.S. as Hurricane Ike makes landfall.  Gas prices jumped as much as a dollar or more almost overnight because many gas stations stretching from Florida all the way to Virginia were rumored to be running low on gas, or had already put the empty signs on the gas pumps.

Got to love the law of supply and demand!

Let’s not dismiss the impacts of someone like Hugo Chavez threatening to shut down Venezuela’s oil supply or the basic fact that many different gas mixtures are required across the U.S. to match the environmental demands.  Toss in newer variables like the increasing global demand for gas now that the rest of the world is attempting to match the living standards of the western world, and we’ve got a quite a logistical nightmare on our hands.

Bottom line, when these different scenarios come together in multiple permutations, we can suddenly find ourselves in the perfect conditions for price appreciation.

So the next time you find yourself being caught up in the latest media spun feeding frenzy, try to remember this example, and sort through the facts.  Ask yourself if you really believe what the talking heads are saying, or can you come up with a few answers on your own rather than the first conclusion that sounds plausible.

Questions / Comments / Suggestions ?

Photo credit:  ABC News