Matthew Engel

Much has been made of the recent drop in oil prices world wide. As we all understand, the price of almost everything in the U.S is directly tied to the cost of non-renewable fossil fuels. This is an extremely unfortunate situation, which we hope to change in the next century, the ‘green’ century some are calling it. I have seen more commercials and ads claiming their product are ‘going green’ in the past month than ever before. Apparently, even the oil companies are going green if you believe BP’s television ads, hardly a trustworthy source of information. The truth is, we could only hope for that type reality right now. Our automobiles are no cleaner than they were last year and our consumption of oil has steadily increased, even with record prices. You should note that value of stocks on the London Stock Exchange skyrocketed, bolstered by record profits of BP - British Petroleum. BP’s earnings were up 83% this year, meaning profits nearly doubled!! Profits increased from $4.4 billion to $8.05 billion this year alone, due to an increase in energy prices.

However, as Thomas Friedman of the New York Time’s reports, the recent (temporary) slump in energy prices has sent the alternative energy (AE) companies scrambling. AE investors are watching their stock holdings crumble as people run to the gas station to buy their $2.89/gallon petro. This is a real shame, however it is fleeting. I think we can all safely assume that after the election prices will resume their normail uphill climb and alternative energy technologies will once again be in full demand.

Therefore, we should all be prepared for a huge spike in gas prices at the end of this year. For the record, it should be noted that in July regular gas was costing $4.11 in the US and oil was selling for nearly $150 a barrel, which is now down roughly 25% at the pump and 50% less for a barrel of oil ($64.02 today on NYME). With the economy diving and spiking wildly, consumer confidence has steadily declined leading to less spendong on recreational items. In turn, this has led to a decrease in fuel consumption and with an oil glut, prices have bottomed out. Thankfully, OPEC has been on the case and called an emergency meeting in Switzerland this week to discuss reducing supply. In fact, OPEC has decided to cut supply by 5%, or 1.5 million barrels a day beginning November 1, 2008. Be prepared.

Ali Naimi of Saudi Arabia - Minister of Petroleum and Mineral Resources, Oct. 23 in Vienna.

If I were a commodities trader, I would be stocking up on barrels of oil. Imagine oil bought at $65/barrel - what profit could be made when it reaches $150/barrel in a few months? If you had the capacity, individuals could store large volumes of gasoline for a personal inventory in preparation for the eventual price spike.