Gas prices nationally checked in at $3.79/gallon this morning, according to AAA. That's almost a dollar higher per gallon than last year, which is putting a crimp on our budgets. People keep asking me, why has oil popped by nearly $25/barrel in just two months? The answer is a toxic combination of fear and speculation, which I discussed with a bunch of CBS TV stations this morning.
Here's the good news: when everyone is freaked out about oil and gas prices and when segments like these air, that's the time when there's usually relief in sight. This is the inverse of a common problem which you may have experienced with your 401 (k)--just after you buy stocks or some other asset that has been on a tear, the price subsequently plunges.
There were two pieces of information that I found interesting that would lend credence to a potential oil and gas pull-back:
(1) My NYC cab driver asked me whether he should buy oil stocks; and
(2) MasterCard Spending Pulse noted that gas sales have fallen for five straight weeks, the first time that has happened since November. About 70 percent of the nation's major gas-station chains say sales have fallen, according to a March survey by the Oil Price Information Service. More than half reported a drop of 3 percent or more, the sharpest since the summer of 2008, when gas soared past $4 a gallon.
The first fact is just a fun coincidence--at 4:58am, I asked the driver to take me to the CBS Broadcast Center, after which he asked me what I did at CBS. I told him that I cover the economy and business and he asked, "Do you think that I should buy oil stocks in my IRA?" I have found that when random people ask questions like these, a top is near. Unscientific? Yes. Proven-definitely!
The second fact is interesting, because prior to the recent five weeks, US demand was picking up for two months. That increase is consistent with the economic recovery gaining steam, but if consumers are already altering their behavior, then we could see relief shortly.
This morning, Goldman Sachs said the oil gush could be coming to an end, but it bears mentioning that all bets are off the table if the Middle East unrest spreads to major oil producing nations, like Saudi Arabia. Short of that, I'm hopeful that we could see a retreat, just in time for the summer driving season.
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