Sep 15 - Gas Prices Could Fall To $1.15

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Props Slaps
 09-15-2006, 01:09 AM         #1
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Tribulations 
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Sep 15 - Gas Prices Could Fall To $1.15
 

 
Analyst predicts plunge in gas prices

By Kevin G. Hall

McClatchy Newspapers

WASHINGTON — The recent sharp drop in the global price of crude oil could mark the start of a massive sell-off that returns gasoline prices to lows not seen since the late 1990s — perhaps as low as $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, he says, they appear to be poised for a dramatic plunge.

Crude-oil prices have fallen about $14, or roughly 17 percent, from their July 14 peak of $78.40. After falling seven straight days, they rose slightly Wednesday in trading on the New York Mercantile Exchange, to $63.97, partly in reaction to a government report showing fuel inventories a bit lower than expected. But the overall price drop is expected to continue, and prices could fall much more in the weeks and months ahead.

Here's why:

For most of the past two years, oil prices have risen 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 disruption to oil production could create shortages.

Fear of disruption focused on f!ghting in Nigeria, escalating tensions over Iran's nuclear program, violence between Israel and Lebanon that might spread to oil-producing neighbors, and the prospect that hurricanes might topple oil facilities 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. 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 in the future bid up the price of oil.

That, in turn, led users of oil to create stockpiles as cushions against supply disruptions and even higher future prices. Now inventories of oil are approaching 1990 levels.

But many of the conditions that drove investors to bid up oil prices are ebbing. Tensions over Israel, Lebanon and Nigeria are easing. The hurricane season has presented no threat so far to the Gulf of Mexico. The U.S. peak summer driving season is over, so gasoline demand is falling.

With fear of supply disruptions ebbing, oil prices began sliding. With oil inventories high, refiners that turn oil into gasoline are expected to cut production. As refiners cut production, oil companies increasingly risk getting stuck with excess oil supplies. There's already anecdotal evidence of oil companies chartering tankers to store excess oil.

All this is turning financial markets increasingly bearish on 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. "I think there is still a lot of risk in the market."

As it stands now, the recent oil-price slump has brought the national average for a gallon of unleaded gasoline down to $2.59, according to the AAA motor club. In the Seattle area, prices per gallon have fallen to $2.856 currently from $3.071 a month ago, a decline of 7 percent, according to AAA.

Should oil traders fear that this downward price spiral will get worse and run for the exits by selling off their futures contracts, Verleger said, it's not unthinkable that oil prices could return to $15 or less a barrel, at least temporarily. That could mean gasoline prices as low as $1.15 per gallon.

Other experts won't guess at a floor price, but they agree that a race to the bottom could break out.

"The market may test levels here that are too low to be sustained," said Clay Seigle, an analyst at Cambridge Energy Research a.ssociates, a consultancy in Boston.

On Monday, the oil-producing cartel OPEC hinted that if prices fall precipitously, OPEC members would cut production to lift them. But that would take time.

"That takes six to nine months. If we don't have a really cold winter here [creating a demand for oil], prices will fall. Literally, you don't know where the floor is," Verleger said. "In a market like this, if things start falling ... prices could take you back to the 1999 levels. It has nothing to do with production."

[pic - click to view]

 http://seattletimes.nwsou .. nsumers14.html


Last edited by Tribulations; 09-15-2006 at 01:11 AM..

121 comments for "Sep 15 - Gas Prices Could Fall To $1.15"

 11 years ago '05        #2
MATIX 
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Good. but they will jump up if some hurricanes start to come.
 11 years ago '05        #3
lakersboy03 6 heat pts
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"That takes six to nine months. If we don't have a really cold winter here [creating a demand for oil], prices will fall. Literally, you don't know where the floor is," Verleger said. "In a market like this, if things start falling ... prices could take you back to the 1999 levels. It has nothing to do with production."
I remember sh*t was under a dollar in 1999.....
 11 years ago '04        #4
Jamaro85 
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This would be nice
 11 years ago '05        #5
§wiff 
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yea If only it could stay that way
 11 years ago '05        #6
bayrider 
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$675 | Props total: 0 0
yeah right

and the middle east loves israel

get real
 11 years ago '04        #7
BunDLeZ 
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Un-fu*kIN-BelivEAbLE!!!!!
 09-15-2006, 02:07 AM         #8
keroZENE  OP
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well even if the oil prices do drop for a small amount of time (even a few years or so), the demand for oil is constantly increasing due to India and China's growing middle classes. So regardless of these small term fluxations in prices, the bottom line is the demand for the oil is constantly growing and the supply is constantly shrinking. So those prices will never stay.
 11 years ago '04        #9
sundance 
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that would be nice...but i find it hard to believe
 11 years ago '04        #10
pimppoet 2 heat pts
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 keroZENE said:
well even if the oil prices do drop for a small amount of time (even a few years or so), the demand for oil is constantly increasing due to India and China's growing middle classes. So regardless of these small term fluxations in prices, the bottom line is the demand for the oil is constantly growing and the supply is constantly shrinking. So those prices will never stay.
Basically I think its bout 2.49 reg unlead last time I filled up hopefully it hasnt done back to 2.89 when go 2 fill up 2 day. Cannt get 2 comfortable with ne price right now.


Kinda off topic but ne body peep the veggie oil fueld cars? I peeped this site . Still thinkin bout coppin a already built one dow n the line.
 11 years ago '04        #11
XxC4xX 3 heat pts
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seen gas for 2.29 here
 09-15-2006, 02:56 AM         #12
~~thegamesux~~  OP
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when the great bill clinton was president u could get gas for 85 cents a gallon
 09-15-2006, 03:06 AM         #13
datkilla  OP
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 XxC4xX said:
seen gas for 2.29 here

me too
 11 years ago '05        #14
bayrider 
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funny seen it for 2.90
 09-15-2006, 08:25 AM         #15
80sbabyent  OP
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the day I got my license that sh*t was 93 cents.. needs to go back to that
 11 years ago '04        #16
MochaWhitey 10 heat pts10
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I'll believe it when I see it
 09-15-2006, 08:52 AM         #17
BlockBurner226  OP
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gas prices round here been falling like alicia keys, a couple weeks ago it was up at like $1.04/L and now its down to $0.79/L, in Toronto it was only $0.69/L at some places
 09-15-2006, 08:58 AM         #18
tmich19  OP
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don't yall get yall hopes up 2 early.....
 11 years ago '04        #19
Rydinwicked16 
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$2.20 here for gas
 11 years ago '05        #20
GaryIn'75 1 heat pts
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$2.15 Here in St. Charles, MO
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