Oil Prices Dip Below $60 a Barrel

MSN Money ^ | October 21, 2005 | Associated Press

[Semper Paratus]

VIENNA, Austria (AP) - Crude-oil futures traded below $60 a barrel Friday, as supply concerns eased on signs of adequate fuel stocks in the United States, the world's largest consumer.

Prices for related products -- gasoline, heating oil and natural gas -- also fell, further indicating that worries about short-term shortfalls were easing.

Related newsDow Closes Down 133 on Economic Concerns High Prices Bolster Energy Cos. Profits Market Report -- In Play (DVN, VLO, XTO, BP, SLB, SU, SUN, PPP, KWK, XOM, APC, TLM, RIG, OXY, MRO, GRP) N.Y. Crude Oil Prices Fall to 3-Month Low Key Economic Indicator Declines Sharply Light, sweet crude for December delivery fell 45 cents to $59.57 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange.

The November contract settled $1.38 lower Thursday to expire at $61.03 a barrel -- the lowest closing price for a front-month contract since Aug. 3.

December Brent crude futures on London's International Petroleum Exchange fell 61 cents to $57.30 a barrel.

[Petronski]

I learned all that in entry-level Economics (actually, it was Economics 110 - Intro to Microeconomics). It's called a supply shock and this has been a textbook example so far.

[MikefromOhio]

we are down to 2.29 a gallon here for the first time in months....

really ever.

Gas went from 1.90 to 2.50 overnight

[Verginius Rufus]

Yep, another item for the articles of impeachment against Bush if the 'Rats recapture the House of Representatives in November 2006.

[SAJ]

Not over any but a very short term. Just because the US isn't building refining capacity does not for a microsecond imply that other nations aren't.

[calex59]

If oil supplies are large but gasoline supplies low, then the price of gas will go up regardless of what oil does. Supply and demand.

[loreldan]

My goodness, you guys are lucky. I've only seen 1 station below 2.75 a gallon. This morning Safeway was at 2.69.

[Sam Gamgee]

As far as I understand there is one market for oil. The commodities exchanges. I don’t believe that OPEC as a cartel is able to price oil at price it desires. If that were so, oil would never have been allowed to droop to the $12.00 level in the mid 90s. In fact I believe OPEC to be completely ineffective as a cartel, for numerous reasons. One being most members cheat. Another being that with reserves in Canada and Russia, there is no possible way OPEC can control the price of its product.

However, I do agree that North America needs to tap into all its reserves. But I seem to remember the Terminator saying that the California offshore is hands off. If someone has a environmentalist fuel driven car in the works, that would be ideal.

[Sam Gamgee]

That would have been a long shot. Not as an April contract however. Unless we get a general recession in the US.

[MeanWestTexan]

It's primarily a factor of inventories. Having owned several 7-11's, the retail price of gas is wholesale + 5 to 11 cents, really depending on how much one pays for your lot.

Seems easy right?

Well, you have a storage tank of gas. 1/2 bought wholesale at X, 1/4 bought at Y, and 1/4 bought at Z --- with a constant changing ratio as the tank empties.

When gas is "going up," people it seems like the whole world rushes out, buy the cheap gas.

The result of the rush is that most of the gas in the storage tank in the next day or so is expensive gas, so the price rises quickly (temporally -- not by the gallon).

There is no similar "rush" as price is going down, so while it takes the same number of gallons sold to make the price go down, it takes longer --- temporally.

Here endeth the lesson in the retail gas market.

[KevinDavis]

Yet some people won't listen...

[SAJ]

That's interesting that the topic appeared in a Micro textbook, Petronski. Usually, effects on aggregate demand are held to be Macro topics. Oh, well.

It would be well to notice (as the idiots in the financial ''press'' and the willfully dishonest jokes infesting the LSM have not, to date) that this year's energy mkts never did experience a supply shock; the threat of one was what created an enormous push-forward in demand. From July to current date, stocks on hand (excluding SPR) have remained higher than last year, 2 yrs ago, and 3 yrs ago.

And, as I think we can agree, we're seeing quite a good deal of demand destruction over the past month or so. If we should be fortunate enough to have a mild winter, particularly in the Northeast, and are able to repair, say, 97-98% of GOM pipe by, say, Feb-Mar, we can easily see $40.00-$42.00/bbl by April. Not saying we will see that level...but it's perfectly possible if events fall right.

BTW, CONGRATS! to you and Cyborg!

[rwfromkansas]

I see on kansasgasprices.com that gas is selling for 2.10 in Topeka. Wow.

[rwfromkansas]

$2.29 here.

[Semper Paratus]

If we should be fortunate enough to have a mild winter

The Sierra Club would not like that.

[Chode]

independant gas station owners are always paying for the NEXT tank of gas, not the one they have.

lets say a gas station buys 1000gals of gas today for $1.00gal, and is selling it at $1.10

and then tomorrow, the NYSE gas-futures quote comes out and says the next tank of gas he buys is going to cost him $1.25gal.

question:how can he buy the next tank of gas if he's charging less than it will cost to buy???

answer:he has to charge today what tomorrows gas will cost or go out of business.

now when the futures price goes down, and he's already paid the high price for the gas, is he supposed to sell it for less than he paid for it cause the next tank will be cheaper?

no... he has to charge what it cost him to buy till HE pays the lower price per tank and then passes the lower price on to us.

[NC28203]

>>>Goldman Sachs to understand what has been going on here. A couple of months ago they were predicting $100/barrel oil this winter,

To be fair to GS, they didn't predict $100 oil. They merely noted that under a certain set of circumstances (most likely a supply disruption in a major oil exporting country), $100-per-barrel price isn't out of the realm of reason. Seeing what a minor disruption in US supply did during Katrina with oil rising above $70, $100 probably is not that unreasonable.

[SAJ]

The Sierra Club can attempt to propel certain renal byproducts vertically along a section of woven hemp...any bleeping day they like.

[JackDanielsOldNo7]

What about the killing they made when gas prices jump 30 to 40 cent a gallon with the cheaper gas in the ground. Shouldn't that make up for it?

[doggieboy]

I thought that as well. So I unwisely dumped my energy fund around the first of the year. I still am amazed how the price has remained high.

[Allen H]

I say that only because a friend of mine who's worked in the petroleum industry for years pointed out to me recently that Iraq isn't in opec, and they sell their oil at half the price of opec nations. If we stopped buying 2/3rds of the oil we buy from opec, and shifted that supply to domestic oil, it seems almost certain that prices at the pumps would drop. I don't know how it couldn't. That's one of the biggest reasons for drilling and using more domestic oil, and less foreign oil, because it would increase domestic supply and supply overall, and reduce the price of the oil.

California needs to be drilled offshore too. RINO Arnold has hundreds of millions so what's he care about the price of gas? It always makes me mad how all the people who are so against any kind of new domestic drilling, also are the loudest mouths griping about the price of gas at the pump. The people most calling attention to the problem are the same ones most responsible for causing the problem. AMAZING!