Oil and gas prices had their biggest one-day decline in months today after an Energy Department report suggested that the highly-touted shortage that has been all over the news in the past couple of weeks is actually not the case.
The September crude oil contract declined by $2.78 to $63.30 per barrel -- a 4.2% decline -- while September gas fell by 9.86 cents to $1.885 per gallon -- a 5% decline.
According to Bloomberg:
Demand for gasoline fell 75,000 barrels to an average 9.4 barrels a day, the lowest in a month, according to the report.
``There are signs that gasoline demand is tapering off, which has reduced supply fears," said [Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York].
U.S. gasoline demand last month was lower than in July 2004 because of higher retail prices, the American Petroleum Institute said in a report released today. The total amount of gasoline supplied in the U.S., a measure of demand, was 9.28 million barrels a day in July, down 0.8 percent from a year earlier, the industry-funded group's report showed.
Isn't that fascinating? Gasoline demand was lower this July than last July. Moreover, crude oil supplies are now 9.6% higher than they were this time last year.
That's right -- I said HIGHER. (cont'd)
So, demand is beginning to decline while supplies continue to increase. Isn't that the perfect formula for lower prices? And, isn't that the exact opposite of what the press has been reporting lately?
Of course, the real question is how will the media report this news this evening and in tomorrow's papers. After all, they've been telling us for the past several weeks that the economy was going to collapse as a result of higher energy prices, and that a crisis was brewing due to looming oil and gas shortages.
If this turns out not to be the case, will the press report to the American people that the situation is improving, or will they cherry-pick the bad news in this report and only share that with the public?
My money is on the latter.