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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Les H who wrote (201972)5/13/2009 12:05:41 PM
From: Les HRead Replies (1) of 306849
 
Driving up the price of gas

Speculation, more people on the road put $2-per-gallon fuel in rearview mirror

chicagotribune.com

But as the economy began to bottom out this spring, big investors started pouring money into the energy markets, betting that a rebound in economic activity could boost demand for oil-related products. That added momentum to the usual rise in gas prices due to increased summer driving and the rollout of more costly warm-weather blends.

Speculative excess also fueled last year's big run-up and precipitous falloff in energy prices. But Kloza said there are limits to how much oil markets can rise when fundamentals are as bad as they are right now.

He said current U.S. demand for petroleum hasn't been this low since May 1999, when the U.S. had 34 million fewer consumers, fewer cars and shorter average commutes. Supply, meanwhile, is at all-time highs when you factor in the 719 million barrels in the U.S. Strategic Petroleum Reserve, indicating that the economy is still running on idle.

"You can make the case that [the price run-up] is irrational exuberance," Kloza said. "Investors may be wearing rose-colored glasses."

But even if the price increases are due to investor speculation, they are no less painful for consumers and businesses.
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