Why Oil Prices Have Dropped

Oil is a commodity, the price of which is controlled only by a few firms and nations. When the Republican Oil Party controlled the White House and both houses of Congress recently, oil firms knew they could jack up their prices at will, so long as demand was not impaired too much, because the Republicans wouldn't do anything about it.

Since August 2008, the price of a barrel of oil has dropped from over $140 to less than fifty dollars. Likewise, the price of a gallon of unleaded regular gasoline has swooned from about $4.25 a gallon to anywhere from $1.57 to $1.79. The price of oil and gasoline has plunged about 60 percent.

The demand for gasoline dove a little over 4 percent from November 2007 to November 2008. That only accounts for a little of the 60 percent drop in prices. So what accounts for the rest?

The Democratic Party will control both houses of congress and the White House in January 2009, and they are pushing for a green economy, which may leave little market for oil and its products. The oil companies are pushing the price down because they control that product and they want to head off the green revolution. Keeping gasoline so low may make it prohibitive to launch a successful green revolution and render oil as obsolete as a horse and buggy.

On the other hand, last month the Organization of Petroleum Countries (OPEC) announced the sharpest reduction of the supply of oil on record in order to arrest the rapid plunge in the prices of gasoline and oil. In other words, they decided to ensure that the supply did not equal demand in order to boost the price of its products. It's all manipulation. Supply does not equal demand, and never has.

In other words, when the price of gasoline is over $1.50 a gallon, the price is being manipulated upward. And it is likely the supply is rigged anytime the price is over a dollar a gallon, and always has been.

This suggests that gasoline and oil prices will remain relatively low until the Democrats lose a house in congress or the White House. In other words, prices will remain low for at least two years until the next election; and longer if the Republicans fail to gain control of one of the three branchs of government.

One further note: As I've mentioned before, this all proves that the concept of "peak oil" is an illusion.