Economy Improves, Oil Prices Drop

What an amazing accomplishment. Investors and speculators have reacted in ways that the Congress has been slow to acknowledge, but as oil prices have dropped $20 in two weeks world financial markets have started to balance themselves out:

Oil prices headed back lower Wednesday, failing to sustain a brief push into positive territory, after the government reported gasoline supplies rose far more than expected.

Light, sweet crude for September delivery was trading down 98 cents at $127.44 a barrel by early afternoon on the New York Mercantile Exchange, after earlier swaying between modest gains and even bigger losses. The August contract expired Tuesday at $127.95.

The Energy Department's Energy Information Administration reported that crude inventories fell by 1.6 million barrels in the week ended July 18, slightly less than analysts surveyed by energy research firm Platts predicted.

Perhaps more significant was the 2.9 million barrel jump in gasoline stockpiles. Analysts had expected an increase of only half a million.

The report also provided further evidence that cash-strapped Americans are cutting back on fuel. Demand for gasoline over the four weeks ended July 18 was 2.4 percent lower than a year earlier, averaging more than 9.3 million barrels a day.

None of those figures gave traders, who have swung to selling mode in recent days, reason to turn sharply bullish just yet.

"The market appears heavily concentrated on demand numbers all of a sudden," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

"These numbers continue to show big-time depreciation in gasoline demand."

As I explained back on the 16th, with a drop in oil prices we will begin to see our markets start to balance out a bit. The stock market, while it still remains fairly rocky, continues to rise almost daily as oil prices drop. The price at the pump is also taking a noticeable dip. And while many Americans are still being frugal with their gasoline purchases, the dip in the price is a welcome relief to many who foolishly predicted $5 a gallon gasoline by the end of summer. (That, of course, could still happen, but it is dependent on the situation in the Middle East, and pressure that is being ramped up against Iran.)

So what is the cause for this? While the doddering old fools in Congress continue to refer to it as a "hoax" the president's lifting of the executive ban on drilling has much to do with the drop in the price of oil. All we have to do now is apply the right amount of pressure to Congress to get them to see that drilling now will help us out. The notion they keep pushing that we would not be able to get any oil out of the ground for up to ten years is a fallacy. We have heard a number of people who work in the oil industry -- not the execs, but rather the men who work on the actual drilling and exploration -- that drilling and pumping can begin within a matter of months, not years.

This is an election issue that neither side can afford to ignore. The Democrats refuse to listen because they are beholden to their environmental lobby. John McCain switched his position because of how quickly oil prices were rising, and the impact it was having with Americans at the pump. That is not a flip-flop. That is reevaluating a position in light of new evidence. He is right. The Republicans in Congress are right. The time to drill is now, and end our energy dependence on foreign providers. Yes, in the process of drilling we should work towards new and alternative forms of energy, but until one that is prudent and economical is developed, we need the oil. This nation runs on oil. Not just the people who drive to work everyday, but the industry that handles construction, that handles the delivery of goods, those that provide us services -- these people need oil as much as we do.

Marcie