Gasoline prices hit a new recent high in The Villages while crude oil future prices settled lower Monday for the first time in days.
The dichotomy left consumers and market watchers wondering whether the lower crude oil prices signaled a return to relative price stability in the wake of this recent unexpected run-up in local gasoline prices.
“ We do not know if this is just a one-day anomaly or whether this is something that really reflects a turnaround in crude prices,” AAA Auto Club South spokesman Gregg Laskoski said.
Prices ranged from around $2.69 a gallon for unleaded regular gasoline Monday in The Villages as crude oil futures settled down $1.82 on the New York Mercantile Exchange at $78.68 a barrel.
The price drop in crude oil futures came as the U.S. dollar traded up against the European dollar, the Euro, CME Group, parent of the NYMEX and Chicago Board of Trade, reported Monday.
Anytime the dollar trades lower, speculative investment traders typically seek profits in the commodities markets, said Jim Smith, president and chief executive officer of the Florida Petroleum Marketers & Convenience Store Association.
Such influence concerns market watchers like Smith because they cite speculative investment activity as the reason for the record high crude oil and gasoline prices recorded a year ago this summer.
The market dynamics have not changed, Smith argued, with U.S. crude oil inventories still up and motorist demand for fuel still down.
Such an aberration in supply-demand economics tells Smith other forces are at work — speculative investors.
“ Where oil speculators are concerned, the phrase would be any port in the storm,” Smith said of their investment market strategies. “ Quite frankly, they’ ve entered back into the marketplace. And they’ ll take advantage of the marketplace anyway they can.”
Concern over the recent run-up in prices poses serious complications as the U.S. economy recovers, noted David Denslow, a University of Florida professor and research economist.
If gasoline prices return to summer 2008 levels of $3 to $4 a gallon, Denslow acknowledged, consumers and businesses could face even more dire consequences this time around.
Neither might have the resources to absorb that type of price increase, Denslow said, which could result in even greater job and business losses.
“ That’ s money that’ s not available for normal expenditures such as food, clothing, school and health-care costs,” Denslow said. “ So it does hurt retail sales.”
It would be even worse for restaurateurs.
“ Restaurants are particularly hurt, because people have less discretionary income,” Denslow said. “ The restaurants already are confronted with an increase in minimum wage costs that took effect in January.”
That could result in fewer jobs, Denslow said.
“ At the low end, it’ s become very hard to get jobs,” Denslow said. “ So this would hurt.”
However, Denslow remains optimistic about the dynamics of this recent influx of speculative investment in the oil futures markets.
“ I don’ t think the huge funds will be able to hold up the price of oil all that much,” Denslow said. “ They’ re gambling. They’ re putting money on the bet that the price is going to rise. That’ s a bet the world economy is going to grow very fast. It doesn’ t grow that fast, and they lose.”
