Gas Prices Fall, The Hemline Indicator

 

Gas prices fall in the USA and in Hungary: but, hem lines continue to creep.

 

Next time you fill up, don’t be surprised if you leave the gas station with a few more dollars in your pocket. Gasoline prices have been falling for months, and they should continue to decline throughout the rest of 2013.

There is a Wall Street superstition that “claims that when hemlines rise, so do the markets. Likewise, when hemlines fall, the markets fall,” according to Investing Answers. Are hemlines really an indicator of gas prices and the stock market’s future? History has given us a few examples of this theory, which goes to show that this isn’t just a one-time thing. Smith Barney indicates that in 1925, short flapper skirts of the Roaring 20s gave way to a rise on the stock market, just as the longer hemlines of the early 1930s seemed to forecast a downfall leading into the Depression (think: the crash of 1929). The economic boom of the 1950s went hand in hand with the knee-length poodle skirts, while the conservative 1970s made hemlines longer again, pulling down the stock market. The stock market went up and down accordingly throughout the years. The 1980s welcomed the Material Girl inspired mini skirt up until the 1987 crash.

The Hemline Indicator, was first presented as a theory by economist George Taylor back in 1926, according to The Big Picture. Research afterwards only helped prove that this is actually a valid theory. According to Taylor, this skirt theory suggests that women’s dress hemlines rise along with the stock market so that when the economy is good, mini skirts become popular, like in the 1960s. Likewise, when the economy is doing poorly, hemlines can drop down overnight, just as the stock market crashes.

According to Investopedia, it is also referred to as the “bare knees, bull market” theory. This theory gained value in 1987 when skirt lengths changed from mini to floor-length just as the U.S. greeted the market crash. The same happened in 1929, but “many argue as to which came first, the crash or the hemline shifts.” When skirts get shorter, it is time to buy and when they get longer, it is time to sell. Investopedia explains that this shows that a positive economy leads to happiness and fun. This ‘fun’ is then reflected in the shorter hemlines, hence the reason why they’re indicative of a good market, while long skirts are a commonly reflective of rather bad news.

The national gas price average, which has held stubbornly above $3 per gallon since 2010, may finally dip below that mark before next year, according to an October forecast by energy information service GasBuddy.com. If it goes that low, it’ll be a discount of about 76 cents per gallon from July, when the national average hit a summer peak of $3.75 per gallon.

That’s a lot more than pocket change. Combined with a decline in driving this winter, lower gasoline prices could help American drivers save $13.1 billion in the fourth quarter, according to Bankrate’s analysis of government petroleum data.

Why are prices falling? You can thank a variety of market forces that are working together to push prices lower. Here are five of the main ones, and how each will make it less expensive to drive this winter.

Did you know that there are many different recipes for gasoline? Thanks to different state and local regulations, your neighborhood pump probably dispenses a different blend of gas from pumps in other states. And there are seasonal varieties, too — summer gasoline and winter gasoline.

Call it an unfortunate quirk of nature: The Gulf of Mexico is home to some of the most promising oil fields in the world. It’s also especially vulnerable to hurricanes.

That makes the Gulf a rich and perilous place for satisfying America’s energy needs.

A well-placed storm can cripple thousands of oil rigs in a weekend, and occasionally one does. Gas prices usually spike in reaction as nervous refineries and petroleum traders gauge how long the supply disruption will last.

For example, in August 2012, gasoline prices surged as Hurricane Isaac whipped through the Gulf and shut down plants pumping 1.3 million barrels per day in refining capacity. In 2005, gas prices jumped more than 46 cents in the week after Hurricane Katrina made landfall, according to EIA data.

This year, Mother Nature has given the Gulf a break. The Atlantic saw only nine named storms, according to the National Hurricane Center. Only two — Ingrid and Humberto — were hurricanes, and neither impacted Gulf oil operations.

Overall, gasoline demand in the U.S. has declined every year since 2007.

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