Compare the rhetoric of 2018, wildly, braced, severed, with that of 2016, huge excess. The extremes of mood literally leap off the page. In fact the unleaded gasoline futures price touched 96.7 cents February 8, 21016. That was the low in gasoline prices and the mood immediately reversed The above prediction of course includes federal and state taxes on gasoline, so the retail price never hit $1. Today unleaded gasoline futures are $2.17.

Crude prices continued to languish Monday, falling $1.75, or 5.9%, to $27.94 in New York. If oil prices continue to march lower, gas stations across a wide swath of the country could soon peddle fill-ups at prices not seen since the 1990s.

Wall Street Journal February 10, 2016

Crude Oil Climbs as Iran Sanctions Stoke Supply Worries

Wall Street Journal today May 9, 2018

Rude price posted their biggest daily gains in a month rising to fresh 3.5 year highs The move triggered renewed economic sanctions on Iran that could reduce the oil supply of an already tight market. Prices swung wildly…investors braced…how severe the impact will be.

Compare the rhetoric of 2018, wildly, braced, severed, with that of 2016, huge excess. The extremes of mood literally leap off the page. In fact the unleaded gasoline futures price touched 96.7 cents February 8, 21016. That was the low in gasoline prices and the mood immediately reversed The above prediction of course includes federal and state taxes on gasoline, so the retail price never hit $1. Today unleaded gasoline futures are $2.17.

Conventional wisdom would have one believe that OPEC mopped up all that excess supply of the world glut of oil. Hmm, did OPEC solve the gasoline glut in the US Midwest I wonder? But really, did demand for gasoline double in the last two year, price clearly did. Uh no, demand did not double. Crude oil and unleaded gasoline are both economics and financial bets on what might happen. And with bets comprising stocks, futures, options, and unregulated derivatives, there are manifold opportunities to magnify the despair of 2/10/16 into the optimism of 5/10/18.

I began this column on Thursday but now Friday’s news is confirming my thesis that mood moves the oil price. Friday’s WSJ reports that WTIC may be $71, but good luck getting that price in Midland. Most producers are getting less than $60. The reason is that supply has outstripped the ability to move oil to the markets. One analyst predicts Permian Basin oil may trade at a $20 discount to WTIC by next year. So there is no shortage here. Indeed the hand wringing over price discounts seems to be going the other way.

It is hardly the case that OPEC has reduced supply. And with so much of the slippery stuff around, and discount predictions on the rise, could a two-year price high oc ur in the near future? IF the real world price is less than $60, the futures at $71 seems, well, pricey.

Dennis Elam is a professor at Texas A&M San Antonio. Contact Dennis at dennislelam@gmail.com