Where are oil and gasoline prices headed?

Given the steep decline of energy commodities prices in recent weeks, it wouldn't be surprising to see a moderate "dead-cat" bounce before we see a continuation of the underlying trend. In fact, it is quite possible that such a bounce could last for days or even weeks before energy commodities embark on their "next leg down."

And since the Republicans are running scared this election season, the administration will take great care not to "scare" commodities markets into spiking upwards with foreign policy saber-rattling in a manner that would further embitter consumers as they decide who to blame in the coming elections.

There is still a fair amount 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 November regular unleaded futures was $1.56 on Friday. That implies an equilibrium retail price of $2.16 to $2.21. The AAA Daily Fuel Guage Report indicates that the national average for regular unleaded is $2.32, suggesting price gouging on the order of 11 to 16 cents. We could well see a fair amount of the gouge evaporate over the coming weeks. And the underlying NYMEX gasoline futures could well continue to trend down as well.

-- Jack Krupansky