Relief at the pump

Brokerage firm Goldman Sachs recently predicted that oil would go to $141.00 per barrel.

Billionaire oil investor T-Bone Pickens priced oil at $150.00 per barrel short term and $200.00 per barrel within 18 months.

Week after week oil prices have been reaching new highs, hitting a new all time high of over $135.00 per barrel last week.

The high cost of oil has resulted in record high gas prices and the sense that everything we buy is effected by the cost to transport it to market; our money is buying less goods and services.

Oil is in a bubble right now and like the dot-com and housing bubbles it will burst, there is a thing called the law of supply and demand, which sets the market price of everything.

The fundamentals of supply and demand are not the only thing moving this market, sure the greedy oil companies, Opec and the president share a lot of the blame for the high price of gas, but the big reason prices have moved up so fast in the last few months is because billions of dollars in speculative money have been poured into the oil sector.

As prices continue to rise, people are starting to use less, resulting in larger inventories of gas. That's where supply and demand comes in to play, the less we use the more inventories will increase resulting in falling prices.

In the end consumer markets always work to bring prices in line with demand.

the Financial times, has already reported that US demand is falling more than expected and the Department of Transportation said figures from March show the steepest decrease in driving ever recorded.

How far will gas prices fall? Who knows, but rest assured of one thing this summer there will be a correction in the oil market.

Will oil eventually go to $200.00 per barrel? Yes it will if we do not get serious about developing alternative energy sources.

However, as I have said before adversity brings opportunity:

Option #1: I think this is a good time to short the oil market, there are some ETF's (exchange traded funds) called proshares ultrashort that short the oil market, when the price of oil goes down these shares go up, I expect to make about a 20% return within the next 6 to 12 weeks, not bad when you consider CD's (certificates of deposit) are only paying about 2% annually.

Option #2: just sit back and enjoy the lower price at the pump while they last.

NOTE: The statements on this blog are my personal opinion, do your own research.