Posted on 09/19/2006 6:09:31 AM PDT by Dubya
WASHINGTON - The recent sharp drop in the global price of crude oil could mark the start of a huge sell-off that returns gasoline prices to lows not seen since the late 1990s -- perhaps as low as 1999's $1.15 a gallon.
"All the hurricane flags are flying" in oil markets, said Philip Verleger, a noted energy consultant who was a lone voice several years ago in warning that oil prices would soar. Now they appear to be poised for a dramatic plunge, he tells McClatchy Newspapers.
Crude-oil prices have fallen about $14, or roughly 17 percent, from their July 14 record high close of $78.03 a barrel. Contracts for October delivery of oil settled Monday at $63.80, up 47 cents, on the New York Mercantile Exchange. Oil prices are expected to keep falling in the weeks and months ahead, just as natural gas prices have over the past year. Here's why.
For two years, oil prices rose because the world's oil producers have struggled to keep pace with growing demand, particularly from China and India. Spare oil-production capacity grew so tight that market players feared that any production disruption could create shortages. Fear of disruption focused on fighting in Nigeria, tensions over Iran's nuclear program, the Israel-Lebanon conflict that might engulf oil-producing neighbors, and the prospect of more hurricane destruction in the Gulf of Mexico.
Oil traders bet that such worrisome developments would drive up the future price of oil. Oil is traded in contracts for future delivery, and companies that take physical delivery of oil are just a small part of total trading. Financial players, such as large pension and commodities funds, are the big traders, and they're seeking profits. They've sunk $105 billion or more into oil futures in recent years, according to Verleger. Their bets that oil prices would rise bid up the price.
That led users of oil to create stockpiles as cushions against supply disruptions and higher prices. Now inventories of oil are approaching bloated 1990 levels.
With fear of supply disruptions ebbing, oil prices began sliding. There's already anecdotal evidence of oil companies chartering tankers to store excess oil.
"If we continue to build inventories, and if we have a warm winter like we had last winter, you could see a large fall in the price of oil," said Gary Pokoik, who manages Hedge Ventures Energy in Los Angeles, an energy hedge fund.
Should oil traders fear that this downward price spiral will get worse and run for the exits by selling off their futures contracts, it's not unthinkable that oil prices could return to $15 or less a barrel, at least temporarily, Verleger said. That could mean gasoline prices as low as $1.15 per gallon.
It's already happened with natural gas, which suffered a price meltdown, tumbling from a post-hurricane high of $15.38 per 1,000 cubic feet to Monday's $4.94 price.
Rove's fault
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Include CalPERS.
IBRYMB!
"in before 'Rove you magnificent bastard'!"
Hope $oro$ is losing his Gass!
Pray for W and Our Troops
No way it's going to get down to $1.15. It hasn't been $1.15 since the price of oil was about $25 per barrel. And it's north of $60 per barrel now.
What makes me feel all warm and fuzzy inside is knowing how much money the DNC spent producing ads about high gas prices for the upcoming election.
Democrats will be miffed. Watch them start bawling for higher gas taxes.
yep.... probably not long after the election.
I'm going to keep clam and not hold my breath waiting for $1.15 gas.
Actually, it could be a DEM plot to make voters think it is Rove's doing, and thus vote DEM. It would be the anti-manipulation vote...
$2.09 in Platte City, Missouri (north Kansas City) yesterday.
Big Oil! Big Oil! Big Oil!!!!!!
~Chortle~
ping for later
1.15 a gallon...maybe. Also could be a MSM strategy to get the voters pissed off at Bush...election rolls around and gasoline is a 1.99 per gallon. Voters storm into the polling places muttering 'that doggone George Bush...where is my 1.15 gas!'
$2.16 in JoCo KS yesterday.
They'll need a rewrite first.
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