Sunday night, Steve Kroft of 60 Minutes, presented a story intended to enlighten the TV audience about what exactly happened with those crazy oil prices.

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Eddy Elfenbein of Crossing Wall Street wrote an excellent analysis of the piece for those who live in the real world.

According to 60 Minutes, the surge in oil prices was due to…(wait for it)…deregulation! Yes, it seems that “hedge funds” (cue Darth Vader’s theme) and “speculators” were buying oil in order to make money. If you just toss around these scare words long enough, people will think it makes sense. Somehow this was all due to deregulation. Of course, oil is traded all over the world, but logic doesn’t play a major role in this story.

It’s definitely worth your time to read the whole article.

60 Minutes seems to diss the idea of supply and demand having any influence on oil prices, but deregulation and Enron are prominently featured. Smallpox, anthrax anyone?

Here’s another look from Todd Sullivan, featured on Seeking Alpha. His cribb notes:

A Wall St. cabal controls oil markets that Enron set up to manipulate prices.

In his analysis, Sullivan uses the actual EIA data to set the record straight. (Read the whole article. Great charts and graphs.)

Now, reset your TiVo season pass for this program.

Doug Miller, at the Beyond Right Field blog thinks oil prices are going back up, and he has a plan to deal with that.

We can tell right off that he’s definitely a numbers kind of guy. First he figured out how many gal. of gas the family uses each month (company cars, but a boat with a tank 10X larger than our personal car). Approx. 160 gal/mo is the national ave. for the standard family with 2.3 kids.

Miller has decided he could possibly trade the ETF for crude oil prices, USO, as a hedge for his personal gas use.

At 160 gallons a month at $1.50 per gallon that figures out to be in round figures $2,900 for the average family for a years worth of gasoline at today’s prices. So, what do you do? You go to your brokerage account and you buy $2,900 worth of USO, then every month you sell 1/12th of your holdings to pay for that months gas. If gasoline goes up, so should USO and that increase should cover the difference in what you are paying at the pump. Beware, you will have short term capitol gains tax consequences and brokerage fees to account for, an could increase your holdings in USO to help hedge some of that, but if oil does go to $100 a barrel again, I think the last thing you will be worried about is paying $6 a month brokerage fees. Also beware, oil could go lower. It wasn’t that many years ago that crude was trading for $10 a barrel, and we could very likely be headed in that direction again. If that is the case, you could actually lose money, possibly your whole investment if USO goes to zero as the ETF doesn’t track oil dollar for dollar. There is also some risk of time erosion with USO as there is a contango in the oil market right now.

He hasn’t stepped up to the plate yet. Looks like one of those “Do Not Attempt This At Home” kind of things to us.

Chris Nelder, author of the Profit from the Peak, evaluates the EIA report, not disagreeing with the revised demand outlook, but disagreeing with the price projection. Here is why.

1. EIA has consistently underestimated future oil prices. It even did its own retrospective to check itself out.

2. OPEC is widely expected to cut production. Its target price is $70-$75 range.

3. Oil production costs are above the price of oil. The oldest, largest and cheapest fields are already or soon to be in decline. For more difficult extraction, companies are going to need something like $65 bbl.

4. We are seeing a few more aberrations, i.e. the steep contango in the 12-mo. forward crude futures. Greater now than it has been in a decade.

Says Chris:

We should always bear in mind that oil is priced at the margins. The last, most expensive barrel essentially sets the price of the whole lot. When there is spare production capacity, as there is now, oil prices will eventually be set by the production cost, which we’re already below. When that spare production capacity collapses to nothing again, as it did when oil prices peaked in June, no one can say how high prices might go.

Even with all the arguments above, Nelder says his crystal ball is cloudy. Oil could keep going down until the supply just dries up.

Analysts see a new plateau in fuel prices, with possible spikes. CNBC ran a series suggesting that current prices did not include a premium for hurricanes or other disasters.

Some analysts project gasoline prices of $7 to $10/gallon.

Thoughtful economic observers like James Hamilton attempt to separate the secular trend from speculation.

Meanwhile, many businesses are operating without much information, even when fuel costs represent one of their biggest threats.

Auto companies, airlines, and fleet managers are all scrambling to evaluate the threat. Is this really a surprise? The demand for fuel from developing countries is clear, US demand has remained relatively inelastic (so far) and supplies are not responding. It is time for a plan.

When we work to help fleet managers and CFO’s, we always try to get the best possible pricing. While it is not our business to predict oil prices, we use every resource possible to find good entry points for those trying to hedge.

A month ago we highlighted an interview with T. Boone Pickens, suggesting that there might be a dip to $78/barrel before prices moved higher. Take a look at the chart and commentary below, taken from Greg J. Troccoli,’s excellent daily Opaleque Technical Research Briefing. It is worth a close look. (Click on image to enlarge).