May 6, 2011 in Business, Nation/World

Gas price to drop as oil joins commodities plunge

Associated Press

NEW YORK — Just shy of $4 a gallon, average U.S. pump prices are about to start falling and could hit $3.50 by summer.

You probably won’t see a change at the gas station this weekend. But relief will come soon because oil prices fell 15 percent this week, the steepest decline in two and a half years. Oil hit a two-year high of $114.83 in Monday trading. It closed today at $97.18.

The plunge was part of a sharp sell-off across in commodities this week. Analysts say investors — demonized as “speculators” by some market watchers — got nervous that oil, metals and grains had risen over the past few months to unrealistic heights.

Their rush to sell knocked silver prices down 28 percent, sugar down 13 percent and natural gas down 10 percent.

While analysts cited reasons specific to each commodity, they had one common explanation for the pullback: The strengthening U.S. dollar.

Commodities such as oil and silver are bought and sold in dollars. When the dollar is weak, those commodities look cheaper to holders of foreign currency so they buy. Conversely, when the dollar rises, commodities look more expensive. So they sell.

Speculators, knowing this, tend to sell commodities and buy dollars if they anticipate the dollar will rise. That amplified this week’s retreat in prices.

18 comments on this story so far. Add yours!

Dazzeetrader11 on May 06 at 2:11 p.m.
Free market does this. $3.50! What a bargain. Whew…even with a 0.75 cent dollar.! How’d the dollar get so weak??? Geee…who makes these decisions??? WHo implements them?? Gee…must be the Usama hero.
Printed quite a few to cover himself. WHo knows, the economy might recover all by itself despite what the government has done to us.
kneedrager on May 06 at 3:26 p.m.
HAHA, how soon we forget. The dollar didn’t get weak in the last 2 years. Where have you been?
Shadedmuse on May 06 at 3:46 p.m.
Obama got Osama on Sunday and then Oil starts to go down. thankyou Obama for getting Osama and start the downward trend in oil. If Mccain was president Osama would still be alive living in a Mansion in Pakistan.
kneedrager on May 06 at 4:06 p.m.
If McCain was president we’d have WAY better SNL skits than we do now…not sure what I want more.
Charlie on May 06 at 4:21 p.m.
Don’t forget, Memorial Day starts the summer driving season which traditionally sees a raise in gas prices. I’m not holding my breath for lower prices. Thinking of getting a motorbike, if I run out of gas I can peddle.
ManleyPointer on May 06 at 4:22 p.m.
Are the pro-Obama forces now going to use an “if McCain were president” straw man, to replace that old standby “George Bush is to blame” ? What Obama does stands on its own, whether it’s bad (stimulus spending, dog’s-breakfast healthcare plan) or good (giving the order to take out osama). I wonder if Obama doesn’t feel a little slighted, or undervalued, by the use of this blame-shifting technique; aren’t his actions significant in and of themselves?
Forgive me; it’s Friday afternoon.
jddavis on May 06 at 4:36 p.m.
President Obama’s tireless hunt of Osama since he took office drove prices up from $1.84 per gallon (Jan 26, 2009) to $3.99 per gallon this week. Good thing Obama “got ‘em”, my fuel budget can’t take much more of that effort!
I guess gas prices have to double so Obama can get credit for a $.50 predicted price drop.
selkirks on May 06 at 5:23 p.m.
@jddavis:
Hahaha!!! What were gas prices before the September 2008 economic meltdown (the one that happened under President Bush)?
$4.00+.
bdr on May 06 at 5:28 p.m.
Did you ever notice in 2008 when the stocks plunged rich people got out of the stocks……..GAS PLUNGED.
Did you ever notice the GOPs insistence in December to continue the BUSH tax cuts..that put a trillion bucks back in the WEALTHY MANS POCKET?
The RICH MAN IS TRADING GAS LIKE GOLD AND SILVER AGAIN.
THE GOP PUT THEM RIGHT BACK IN BUSINESS!
jddavis on May 06 at 5:34 p.m.
@selkirks
I have to use abstract thinking and faulty logic to pull off sarcasm…thanks for getting it!
To continue the Bush v. Obama analogies of greatness, I anticipate gas prices to be under $2.00 per gallon by mid-July because President Bush cut the prices in half between September 08 and January 09, and President Obama is at least twice as great (or half as bad) and can make it happen in two months, compared to 4 months for Bush.
Jerrod Smith on May 06 at 5:46 p.m.
The real problems lies with the fed’s financial decisions.
Bernanke has screwed things up to the point now that the U.S. economy is all but doomed.
See this for answers to many of the questions about our economy.
http://talkspokane.proboards.com/index.cgi?action=display&board=worldnewsandevents&thread=1311&page=1#1460
JBlim on May 06 at 7:48 p.m.
that old standby “George Bush is to blame” . . .
How could George Bush have ANY affect on the economy after being president for only 8 years and only wasting 5 trillion dollars in Iraq? How ridiculous. . .
Dazzeetrader11 on May 06 at 8:32 p.m.
You hicks don’t really think Obama’s going to let gas drift down do you? Why…the greenies would die…..which is not a bad idea mind you. (it’s not a good one either)….but Obamas gone on a tear against normal energy . He’ll get the prices back up. Not to worry.
hamrsrscarry on May 06 at 8:44 p.m.
Gas prices are predicted to plunge.Employment way way up. All since our handsome, virile, and deadly President killed OBL.
God bless you, President Obama and your homeland of Kenya. God bless all of you.
D Statler on May 06 at 8:54 p.m.
Idiots here blame OBAMA,BUSH, McCAIN,The man on the moon.Future rocket scientists of America remember the effects of deregulation. The empty promises that the market would take care of itself. Greed and manipulation have hurt more than the cost of gasoline in America.Record profits are being posted all thru the Fortune 500.I hate to sound like a commie,but it is high time to let the Government take back over these corrupt big buisnesses with regulatory controls.The market manipulators should be prosecuted.I am all in favor of Americans creating an energy co-op.Possibly buying up one or two oil companies and turning this unjustice around.
OBAMA = EMPTY PROMISES OF CHANGE!
Dazzeetrader11 on May 06 at 10:55 p.m.
Shaded…sorry but one has nothing to do with the other. Be brainy….here’s the news from Obama’s friends he’s supported. Just a tiny downturn friends.
http://www.cnbc.com/id/42928363
misjustice on May 06 at 11:03 p.m.
****If Mccain was president Osama would still be alive living in a Mansion in Pakistan.*****
Well, McCain isn’t president so we will never know, will we? Just a stupid comment to dig at Republicans.
misjustice on May 07 at 10:11 p.m.
Well, one of two things would have certainly happened if Gramps McSame and Mooseilini would have “won”; either Gramps would have mysteriously taken an accidental fall down a long staircase, OR Mooseilini would have quit…
Just sayin’…
; )