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Oil Prices Are Falling -- Fast

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- Americans are about to let out a big cheer because pretty soon, gas at the pump should be a lot cheaper. Oil as measured by the S&P GSCI Crude Oil Index is down more than 7% today! Since its peak on May 2, it is 21% lower. Now who says that there wasn't a risk premium attributable to Osama bin Laden? (I believe it was just a coincidence that oil peaked the same day the Navy Seals took him out).

The amazing thing is that Americans are just satisfied that gasoline prices at the pump are heading lower. No one seems to be questioning the rate of decline. We should be outraged! Since the national average for regular gas hit close to $4 per gallon in early May, it should be around $3.16 today. However it is significantly higher than that.

Don't give me this mega oil industry jargon about lag time for prices, crack spreads, and summer blending issues, because when the price of oil was rising, the gas stations were raising their prices daily just to keep up. The rate of change should follow price in both directions.

So why are prices declining? Aren't there multiple protests and even war zones in several of the oil producing countries? Apparently that does not outweigh the slowing rate of growth for the global economy.

Domestically all of the economic reports for the last few months point to a slowdown or in some cases a return to negative growth. Clearly the U.S. housing market has slipped into double-dip territory with prices lower today than at any point in the recovery.

The fears of inflation due to rising food and energy prices may soon get knocked off by a rising fear of deflation. Governments are continuing their attempt to stave off defaults around the globe due to lack of economic growth. Food prices may remain high as production factors, weather, and a growing global population put a crimp into supplies.

Fear is starting to grip investors and for good cause. Institutions are in sell mode. This is very evident when looking at the trading volume on down days versus the market's rally day volumes.

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