News today that oil prices have fallen to its lowest level in more than a year doesn't really surprise me. I have long felt that the price of oil was artificially inflated and bid up by market hysteria as speculators competed against each other to buy oil they never intended to acquire or deliver.
Oil closed today at $82.24 per barrel, which is 44 percent below the record of $147.27 set July 11.
But, here's where I don't buy the argument that market forces dictate gas prices. One year ago, the national average for unleaded gasoline, according to the U.S. Department of Energy, was priced at $2.78 per gallon.
This summer, when oil was trading at its highest level in mid July, gas prices had jumped to $4.24 per gallon.
So, now that oil is back down to its one-year low, why is the average price of gas still hovering around $3.48 per gallon? If gas companies could supply a gallon of gas for $2.78 a gallon one year ago when oil prices were the same as they are today, what accounts for the 70 cent per gallon difference?
In fact, if oil is down 44 percent -- and it's the chief ingredient of gasoline -- then I would suspect a market drop in gas prices of 44 percent, which should pull gas prices down to $2.37 per gallon.
As much as I would like to believe oil companies when they say the market regulates prices, not the oil companies themselves, I have a very hard time buying that argument.