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'm all for big American cars w/tailfins, big V-8s, etc., etc,--and it's never too late to bomb Tokyo!!!!!!!!!!
Here we go again.
We've got $2.09/gal here in Kansas City.
We've got $2.09/gal here in Kansas City.
Right after the BP pipeline problems were reported, all the pundits predicted $4/gallon gas.
That was about 5 weeks ago.
The price has dropped like a rock ever since, LOL
$2.37 in Madison, West Virginia.
So my gas bill should be a third what it was last year...right? Anyone? Anyone?
Hopefully George $oreA$$ is losing his financial A$$.
Of course he seems to slither away from these losses and leaves the left wing run pension funds like CalPers holding the bag.
Many of the big state employee pension funds are not our friends. They are run by entrenched liberals, who hate GW and love left wing investments. Friends of Bill and Gray Davis have gotten a lot of money thrown at their financial schemes since 1993 by Calpers. Does the name Ron Burkle ring any bells?
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.And will the drop be reflected on my PSEG bill? Just curious.
As to the bigger question, how this will effect politics: supposedly presidential popularity is inversely pegged to the price of gas.
How stupid is that?
What kind of a moron --- left, right or center --- would like Bush because the price of gas is low and dislike him because the price of gas is high?
What kind of empty-headed moron bases his/her approval of the president on the current level of a commodity price? Evidently there are millions.
$1.99 in St. Louis, Missouri, at Sams Club, 2855 Veterans Memorial Parkway(member price)
How big?
http://www.gasbuddy.com/gb_gastemperaturemap.aspx
Still paying high 2.80's here...
Shocking. The MARKET is impacting prices.
$2.29 at Costco in Leesburg, VA
a hedge fund collapsed this week after Natural Gas positions went south. Probably the same will happen if crude oil prices keep falling.
The Muslims are pissed over this and demand an apology from the Pope.
You can be certain there will be conspiracy theorists saying so.
-ccm
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