See, I Told You So: Oil Price Drops

RUSH: Let me check something here, folks, real quick. Yeah, the oil price plummeted like six bucks in 15 minutes this morning right before the program started, and the Dow Jones Industrial Average is up around 135 to 137 right now. A couple things about this oil price. Why is the oil price coming down? Because there was a report this morning that inventories are increasing, and why are inventories increasing? Because people are using less because the price has gone up. Now, I remember, what was it, a month ago now, we had a long discussion on this program when everybody was saying that the oil price per barrel was going to get to $200, and I said, ‘Folks, even if it does, it is not going to stay there ’cause the market can’t support it, the market won’t be able to support $150. The aviation industry will not be able to stay in business if it gets that high, it’s just that simple. Market forces are market forces and nobody is going to bail out airlines and nobody is going to subsidize fuel costs, it isn’t going to happen.’ And so, lo and behold, look what happens when Congress just stays out of things, when they just stay out of it. By staying out of it, I don’t mean opposing drilling. If we could come to an agreement on that, then these prices would plummet even further.

But that aside, doing nothing, people responded to the price. There was a tipping point in the price of gasoline; it was four bucks per gallon. Once it hit that, people started making dramatic, noticeable changes, resulting in less usage, which resulted in greater inventories. Guess what’s happening to jet fuel? Bloomberg had a story, I think this was Monday late in the afternoon. I printed it out and was going to use it yesterday. Again, didn’t get to it. But Bloomberg had a story on what’s happening to jet fuel. Jet fuel prices are going down as well, and you know why? Because there’s so much supply. Look at all these airlines parking airliners. I think one airline alone said they’re going to cut back to the tune of grounding 400 airplanes, or maybe that’s the total number of groundings with two or three big airlines, I’m not sure which. But regardless, you park that many airplanes, and that’s a whole lot less jet fuel you’re using. This story was a sob story about the price of jet fuel falling because the people who sell it, that’s bad news for them. I’m reading this, ‘I wonder what people would think with all these high prices and everything, what would people think with a sob story about prices going down?’ That’s what the consumer wants. It’s what the airline industry wants, but the people in the refinery businesses and so forth who sell these products, not good when the price goes down. So in every bit of economic news, there’s good and bad, depending on whose perspective you’re looking at.

Anyway, this Bloomberg story suggested that the plummeting sales of jet fuel, simply because there are fewer airplanes flying around, was going to lead to a precipitous drop in the price of oil per barrel. This story cited some experts who said if this keeps up, that the barrel price of oil next January, not jet fuel here, the barrel price of oil would be $90 next January. I’m wondering, ‘How come this news hasn’t made it beyond the Bloomberg wire?’ Because every time there’s a story about some sheik or some analyst or some liberal Democrat somewhere predicting that the oil price is going to hit $150 or $200, it’s plastered all over the place. But here’s some people speculating that the barrel price might come down to $90 by January because of all this restricted usage. So there isn’t a shortage. I even saw a story yesterday, somebody predicting gas lines, somebody is predicting gas lines, it’s just right around the corner, all this doom and gloom. It ain’t going to happen. It is not going to happen if these supply figures continue to increase as people continue to drive less. People are not going on as many vacations; they’re not taking as many days; they’re not driving as far; they’re cutting back on a lot of things. Real market situations and circumstances having a real effect, and the members of Congress haven’t done anything.

About the only thing that’s happened here is that the president has done a couple press conferences in which he’s touted the strength of the economy. So these high prices that were forecast, $150 a barrel, $200 a barrel, the market could not support those. There’s no way that they’re going to be kept that high even if they got there for a day or an hour or whatever, and we’ve seen that, they did get to $147. It’s $133.33 right now, got down to below $130 earlier today. So it’s fascinating to watch this, and watch now the oil price is coming down, and it’s not being reported in too many places, and where it is being reported, it’s being reported as a bad sign for Big Oil and the refiners and all these people who make their money selling the stuff. After six solid weeks of coverage bemoaning the effect on the poor American consumer, the price starts going down and the Drive-Bys run sob stories even about that! USA Today and these newspapers wonder why it is that their ad revenue is plummeting, their circulation is plummeting, and they’re having to lay people off.

I have never seen a more regimented business. The Drive-By news business is becoming more and more regimented; there is less creative thought; there is less curiosity. It’s like a formula that is getting tighter and more strictly controlled and followed to the point that I don’t care what newspaper you pick up and read, given the subject matter of the story, you will be able to predict the take. When you can predict the take, when you can predict what’s going to be in a news story, why, ladies and gentlemen, read it?