This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

There's No Justification for Crude Oil Prices in the Stratosphere

NEW YORK (TheStreet) --Speculation for crude has been rampant over the past six months.  Despite the fact that we are merely one month and 0.03% away from making an all-time high in crude oil supplies, we're seeing WTI crude at $102.76. If the price was based purely on a supply/demand theory, we should be in the low $80s.

We've all heard market pundits mention the U.S. should repeal all the laws prohibiting the exportation of crude oil. What they don't mention is these laws have not prevented these companies from exporting all forms of refined products. We have doubled our exports of gasoline in the past five years. Despite this, people are paying about $4 per gallon at the pump. Regardless of what you feel about fracking, it has produced huge amounts of oil.

Recently, U.S. refineries decreased production to about 9.5 million barrels a day. Despite this decrease we saw an uptick in the surplus of gasoline by 0.2 million barrels. This shows us the demand is slightly down while prices continue to climb.

Why? Well there have been several reasons over the last six months to believe that crude may spike. Russia, a major producer, was playing a risky game of geopolitics with Ukraine and the rest of Europe. Things were tense and worries were high that the supply they gave Europe could be turned off. Libya, a very minor producer in the global landscape, had a revolt where rebels stormed the capital. They were already only running on a fraction of capacity. Iran, another major player, had been hit with major sanctions limiting its output.

For the most part, all of these political fears have been resolved. Putin appears to be playing nice, and is even telling Ukraine it has more time to pay its natural gas bills. Libya has calmed down to a whimper. Iran not only had been ignoring earlier sanctions, the U.S. gave it the green light to go ahead and produce as much as it wanted as long as it discontinued the nuclear program. T

This all has happened while Canada realized the oil sands in Alberta, in addition to not drying up, were yielding much more than originally thought. Just for this area alone Canada is realizing there will be an increase of 72,000 barrels a day than originally expected.

Due to the invention of fracking, U.S. production was up 14% in 2012 and 15% higher in 2013. Just since January of this year crude production is up roughly 12% again. North Dakota and Texas are responsible for the vast majority of this production, but it is only a matter of time until they find another hot spot somewhere in the U.S.

We are literally at the point where we are running out of storage room for our crude and companies are distilling it for export.

What's the point? There's no longer any excuse for us to be paying more than $3 per gallon at the pump. We're all for using cleaner energy and getting rid of crude, but in the meanwhile prices should be much lower.  The entire 25% difference would be going directly to GDP in the long run.

Speculators, wake up! With all the geopolitical issues resolving themselves... crude isn't worth $103 per barrel.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

>>Read more: Oil Inventories Drop as Summer Driving Season Kicks Into Gear

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,982.59 +22.02 0.13%
S&P 500 1,978.91 +0.57 0.03%
NASDAQ 4,444.9090 -4.6550 -0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs