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.
I'll believe it when I see it,although I do look forward to seeing these prices plunge.
The only thing that disturbs me is that these falling prices will defeat our goals for energy independance.
1999? Oh how I pine for the clinton days, when everything was just wonderful in America.
Every Demo ad around here bashes "big oil." These tough brave Democrat candidates are going to take on big oil! What does that even mean?? They never specify. I guess they think someone needs to march into the offices of Mr Exxon, Mr Sunoco, Mr Shell etc and take all those gobs of cash that are being hoarded in their safes! LOL.
Got that right.
That's why I am openly taking an educated guess to wonder if the SEC and FTC are quietly investigating hedge funds to see if a few Democratic-leaning hedge fund managers may have tried to deliberate manipulate the crude oil futures market to help Democrats. If that is the case the Democratic National Committee will have a LOT of explaining to do....
I could see $1.75. $1.15, doubtful.
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.
I switched to Diesel 18 mo. ago and started stockpiling that. Now gas prices are way down and Diesel slowly following. Next resupply of the tactical reserve is ~OCT15.
Markets beware!
You mean no matter how much they fall the Dems will still claim they're too high.
Maybe I played too much baseball but I think that they are jinxin' the whole deal by talking about it.
As Bob Hope said, "Surprise me."
The report indicated that gas was a function of the oil price and that oil had to get to $15/bbl to get 1.15 gas. Duh. So, where do you think oil will be when it hits bottom as the market experiences a "crash"?
Well it takes time and money to put those news packages together.
Somehow, it seems, my natural gas supplier has not gotten the memo...
So what's their idea of a "fair" price.
So what does this mean for E85? Losing it's luster?
I wondered that too. But, you know, if the price comes way down, then the Dems will just say the Republicans were manipulating the gas prices to make the price fall in time for elections.
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