The price for gas has fallen below $7 for the first time since April 2022 in a headturning move that has traders wondering whether the worst is over.
From inflation, to the cost of living, to bitcoin and stock prices, everything will be affected if gas has topped, with the question of course being whether it has done so.
The price of gas has risen from $1.6 in July 2020 to its highest level since 2008 this June when it briefly traded at $9.30.
Most of the gains have been since March when it doubled with some speed from $4.50, but we’re seeing a fairly sharp fall since June 13th, now down to $6.65.
Is this a trend, even a crash maybe? Down to $4 again or even less? That’s the big question and the answer may well be yes.
After failing in diplomacy with the whole debate on whether Biden will visit Saudi Arabia, while Boris Johnson came empty handed from there, and while Germany’s Scholz’ shopping for gas may take some time to bring results, Powell has now seemingly taken charge of that diplomacy.
America clearly might not be able to easily order anymore, but it can burn the whole thing down even if it has to shoot itself in the foot.
That’s basically what Powell plans. Increase gas and oil production to lower prices, or we crash our economy and crash your oil and gas too.
For long, gas and oil traders were not taking it seriously at all, while Saudis got all cocky, but the 0.75% hike, with indications there may be more hikes like it, now leaves no room for doubt that America may be incompetent at many things, but they’re very competent at one thing: crashing stuff.
A better way of saying it is that the United States, in combination with Europe, still dominate and by far in finance. We are now thus seeing its might.
The vast majority of the price of gas is likely due to speculation. A clear example of it is oil during 2020 when actual demand fell by just 10%, but speculators crashed the price down by 80%.
Pricing in, as it happens, is a very inexact tool. You can price in the direction, but arguably it is impossible to price in what is unknown: the future.
So in gas too they have likely overshot and quite a lot. It is also mostly a product of ‘pricing in’ because Russian gas has not quite been cut off for example.
We’re thus probably getting that 20/80. 20% of the rise is probably due to demand, but 80% is just speculation that has gotten a bit out of hand.
As it happens US has the tools to deal with that speculation, so gas is falling and hopefully will keep diving to $4. Oil should start falling too.
If they do and stay there, for oil $70 or less, then it might not get worse in autumn, inflation might fall, stocks might stop getting rekt, bitcoin might chill out a bit, and Powell might not hike too much anymore.
Gas producing nations therefore might want to keep speculators in check themself to avoid the wrath of the United States which clearly has the tools to address out of hand speculation.