Under $3

Yesterday I noticed that for the first time since I've been living west of the Rocky Mountains (only since May, for those of you not keeping score at home), gas dipped below $3 p/gallon. In fact, this is the cheapest gas has been out here since March. And, of course, everybody is thrilled. Especially the analysts, who you very easily beaming with the good news, "Don't worry, people. The worst is over. Our refineries are working at full strength, without problems. The price of gas is no longer related to the price of oil. And besides, even the the price of oil is tumbling after its quick ascent to $78 p/barrel week."

I hate to be so damn depressing, and I know I have been, but don't believe it. Or, if you do believe it, don't sell that Hybrid in your driveway for a new Expedition. A few things to keep in mind: (a) investors stopped their profit-taking, and thus stopping the price plummet, the very moment ConocoPhillips shut down two refineries on the East Coast (it should be recalled, US refineries are held together with spit and paper, and there is no major investment to create any new ones); (b) the price of oil skyrocketed last week even though there was no major disruption like a hurriance in the Gulf or flare-up in the Middle East; (c) the infrastructure of the oil industry, not to mention our levels of consumption, are such that it will not take much of a disruption to diminish the glut of gasoline that is causing gas to be cheaper than oil; (d) those people our newspapers quote as experts in forecasting the future cost of oil & gas have, for the most part, consistently & grossly underestimated their price; and lastly (and most importantly), (e) the price of gas has everything to do with a temporary supply glut -- with maybe a very little related to a slight uptick in conservation (esp. in California) -- NOT because we are producing more oil than we are consuming -- because, quite simply, we're not.