Oil drops for third day because of economics 101.

As much as we all have wanted to string speculators up by their thumbs (and they do have it coming), the drop in oil over the past three days has been because of downward pressure being placed on the market by fundamentals.

Remember my post a few days ago discussing the main pillars to what is proping up oil prices? Well a couple of them are crumbling ever so slightly.

The two main factors pushing oil prices down currently is a significant drop in use over what was predicted (yeah, thats right a guess) and over what was used last year in addition to “positive” signs that the situation in Iran might be defused without conflict.

The unexpected increase in supply helps remove much of the fear in speculators about being able to meet global demand. The recentl diplomacy with Iran by the Bush administration helped take the edge off of some of the geopolitical risk which at one point boosted prices by as much as fifteen dollars in a single day.

Now, take these moves into account and then look at what Democrats and Nancy Pelosi are trying to solve the same problem. Are they in any way trying to open up new supplies or put downward pressure on the market? No.

In fact they are doing just the opposite by digging in against any new exploration and adding regulations which could make it harder for domestic exploration. Their Orwellian name for the legislation? DRILL.

It is because of that announced policy, combined with some speculators trying to get in on the market when they consider it a low that prices started to rise today.