Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135. Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters’ assessment at a hearing on proposed legislation to limit speculation in futures markets. Krapels said that it wouldn’t even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in futures markets.
Gasoline should drop immediately, to around $2 per gallon, and a barrel of oil should be around $60. Prices at the pump should drop immediatley. For tight household budgets that is great news. Home owners expecting ARM increases would see some light at the end of the tunnel, and those hoping for a mortgage bailout or foreclosure rescue would also benefit.