Where are oil and gasoline prices headed over the next few months?

One of the factors that was stimulating speculation in energy commodities over the past eight months was all of the administration's saber-rattling over Iran and its so-called "nuclear ambitions". But with the election coming up and the Republicans running very scared, the administration is forced to do its best to tamp down market expectations of a military conflict or oil supply disruption with Iran and to assure that consumers don't take their anger over high gasoline prices out on Republican incumbents in the November election.

The administration or even the big oil companies do not control oil and gasoline prices directly, but the administration (with help from Congress) does control foreign policy and does have the ability to either calm markets (driving commodities prices down) or incite them with talk of confrontation that could lead to military action or maybe an embargo or halt to oil exports by Iran (driving commodities prices up).

Without war fears "guiding" the commodities markets up, commodities are likely to trend down. There may be occasional rallies, but the overall trend will be down.

There is a lot of price gouging going on right now in retail gasoline prices. The rule of thumb is that retail gasoline is in equilibrium at about 60 to 65 cents above the wholesale price as indicated by the front-month NYMEX regular unleaded futures contract. The NYMEX price for October regular unleaded futures was $1.4722 on Friday. That implies an equilibrium retail price of $2.07 to $2.12. The AAA Daily Fuel Guage Report indicates that the national average for regular unleaded is $2.417, suggesting price gouging on the order of 39 to 44 cents. We could well see a fair amount of the gouge evaporate over the next six weeks. And the underlying NYMEX gasoline futures could well continue to trend down as well.

-- Jack Krupansky