http://www.chron.com/disp/story.mpl/front/4198621.html Could $2-a-gallon gas be around the next bend? By BRAD FOSS Associated Press WASHINGTON — The likelihood of finding $2-a-gallon gasoline in some parts of the U.S. is increasing by the day. The nationwide average at the pump is already below $2.50, and with a huge decline in oil and gasoline futures today analysts say the outlook for motorists is only getting better. "We'll see sub-$2.25 a gallon retail (prices) by October," said Tom Kloza, director of the Oil Price Information Service, adding that prices below $2 can already be found in Kansas, Missouri, South Carolina and other states. Oil prices sank by more than $2 a barrel today to settle near a six-month-low as worries about supply threats eased and signs of economic weakness in the U.S. signaled a potential cooling of energy demand. The selloff brought crude oil futures to a six-month low, and helped weigh down already sinking gasoline prices. "The real-time fundamentals of supply and demand are bearish," said Societe Generale commodities analyst Mike Guido. Global inventories of crude oil are rising and in the U.S. — the world's biggest energy consumer — demand is tapering off. "There are signs that the housing market could have a bigger impact on the economy going forward," he said. Moreover, pre-summer fears that hurricanes would disrupt Gulf of Mexico oil production have so far not materialized and speculators who had once helped to drive prices higher are now making bets on further declines. While the market's psychology has clearly shifted, traders remain cautious about the West's diplomacy with Iran over its nuclear program, though they are increasingly less fearful than they once were that Iran will pull oil off the market. Light sweet crude for October delivery fell $2.14 to $61.66 a barrel on the New York Mercantile Exchange, where gasoline futures tumbled 7.58 cents to $1.5038 a gallon. It was the lowest close for front-month crude futures since March 21, when oil settled at $60.57. Oil prices have fallen 20 percent from a record settlement of $78.40 a barrel on July 14. Also influencing trade, analysts said, was the market's preparation for a shift in the gasoline contract. At year's end, the unleaded gasoline contract the market has traded since 1983 will be replaced by a futures contract known as the reformulated gasoline blendstock for oxygen blending, or RBOB, which is already being traded actively on Nymex. The move stems from the refining industry's decision to introduce ethanol as a substitute for methyl tertiary butyl ether, or MTBE, in summer blends of gasoline. The unleaded gasoline contract had been reformulated for summer with MTBE. The Organization of Petroleum Exporting Countries confirmed traders' suspicions about the impact of a slowing economy on global demand by announcing that the fourth-quarter demand for its oil would be 320,000 barrels a day lower than previously forecast. In 2007, OPEC expects demand for its crude to average 28.1 million barrels per day, or 800,000 barrels per day less than the 2006 average, in part because non-OPEC supplies are rising. As a result, some analysts believe the Vienna-based cartel, which is pumping close to 30 million barrels a day, may soon cut its output. "If we get below $60, they're going to begin to take away barrels," Guido said. "But it's not going to make a difference." Some analysts believe trimming production could backfire because it would signal to a market that has worried for several years about tight supplies that the world finally has oil-production capacity to spare. "OPEC has some tough decisions to make," said John Kingston, director of oil at Platts, a division of McGraw-Hill Cos OPEC President Edmund Daukoru told Dow Jones Newswires today that the need for an immediate output cut was eased on Monday after BP PLC announced that production at a massive platform in the Gulf of Mexico won't begin before mid-2008. Analysts had been expecting BP's Thunder Horse platform to produce as much as 250,000 barrels a day of oil by early 2007. "This most certainly does remove the prospect of OPEC cutting production (in the near-term)," Daukoru told Dow Jones Newswires.
http://today.reuters.com/news/artic...0_US-ENERGY-GASOLINE-PRICE.xml&src=rss&rpc=22 Gasoline price could drop another 25 cents :Govt Wed Sep 20, 2006 1:43pm ET WASHINGTON (Reuters) - The price U.S. drivers pay for gasoline is expected to drop another 25 cents in the short term to a national average of $2.25 a gallon, the federal Energy Information Administration said on Wednesday. "Reductions already seen in spot and futures markets could imply a further decrease in the U.S. average retail price of as much as 25 cents (to around $2.25 per gallon), if those wholesale markets don't turn upward in the interim," the EIA said in its weekly review of the oil market. The national price for regular unleaded gasoline has already declined 54 cents over the last six weeks since reaching a summer peak of $3.04 a gallon. Helping to push pump prices lower is the price for crude oil, which accounts for about half the cost of making gasoline. Oil sank to $60.60 a barrel on Wednesday at the New York Mercantile Exchange, the lowest since March 21. While motor fuel at some service stations around the country is selling for less than $2 a gallon, the EIA said it does not see the national average for gasoline falling below $2 "unless crude oil prices continue to decline sharply."
I'm thinking this is most likely the beginning of the next recession. We've been on the cusp of it in terms of historical cyclical periods (3-5 years of growth) for the past year or so. It should be comming around about now and falling energy prices have historically been a leading indicator. There was a little dip in stock prices in July followed by a little bit of a resurgance lately but that's just the suckers buying up based on relative values. I think I'm going to start selling short or buying puts.
it is interesting to see now with the trading. some companies are going to get blown out and have some potentially big big losses by hedging. rumor is TXU f-ed up on their nat gas hedging and might have some pretty big losses next quarter. we'll see if that turns out to be true. we've already had 2 hedge funds shut down because of nat gas. one under 500 million and another that was over 8 billion. the selling in oil looks almost panicky and pressured selling. who knows where it will bottom. on a side note, chavez has also come out and said a fair price for oil is above 50. so we are starting to see where a floor might start to be built by OPEC.
yes the world still demands the oil, but i am saying people start to adjust their lifestyles when oil and gas go up so they use less of it. and you are correct the price was not supported by the demand and it was only a short term deal where people were panicking and getting ahead of themselves.
my business partner has been saying this for about 5 months now. when i told him he looked like a prophet he said, "you don't become a prophet by saying the economy will eventually find its way to recession..because it always does."
we'll see. as one of the articles i posted indicated, it might not matter at this point. they may not have nearly as much effect on price as they think they will have since supplies are so much more than they thought they'd be. but i could certainly live with $50. that would mean seriously reduced prices at the pump. i think $50 is a pretty realistic number...but wouldn't be surprised AT ALL to see it fall below that.
Believe or not, if OPEC cut output by 10%, oil price will shoot back to $70 in no time. They do have a lot of influence on oil price. They just may not want to exercise it. I suspect Bush has secretly tapped into strategic reserves to bring down the oil price. It is amazing how quick people changes opinion. The economic growth of China and India is still gonna be there. Iraq may see a civil war any time. Things can change in a day. I don't see oil price go below $50. I wouldn't be suprised at all if oil price rebounce very soon.
1. opec has done that before, and it hasn't worked. why is everyone seeing this as so unprecedented? the price of fuel has been on this cycle ride before. we have had gas shortages and oil busts before. up...down..up..down. all while being told that oil would surely run out within the next 30 years. despite efforts from suppliers in the past, the prices have still plunged. again, i've read more than one expert now say that he doesn't think opec's best efforts will keep the price of oil from falling. it's just not that simple. 2. opec itself was saying supply was not an issue even as prices were peaking...they've been saying that for months now. supply wasn't driving the price of futures...fear was driving the price of futures. fear that a hurricane would knock supply off...fear that iran would cut all oil production...fear that nigerian unrest would upset supply. all at once. all of these fears are being alleviated. i remember even those on the other side of this discussion from me were saying that tapping into the strategic reserve would likely save us all only about $.05/gallon at the pumps. we've seen the price of gas fall about $.50/gallon in the past few weeks. 3. the problem is they've overstated potential demand so many times now that the market doesn't believe it. the other problem is that all of this assumes that we make no strides in terms of fuel efficiency. it assumes we don't make strides in more efficiently refining heavy crude, which is abundant. it assumes none of turn to alternatives. it assumes that telecommuting won't be more utilized in the future. it assumes technology in finding and extracting oil won't develop. in essence, it assumes the absolute worst...that there will be nothing but development in China and India with absolutely nothing to mitigate it in the rest of the world. and when these "experts" overstate demand forecasts over and over again, it makes the market doubt them. and now there will be a "scare" factor as people are taking a bath in various commodities right now...including natural gas.
i dont think opec would risk cutting supply right now. if oil prices come down significantly a lot of the pressure to develope alternative energy will ease up. plus from what i understand saudi still does its budgets estimating oil to be around 25 a barrel. not saying they might not get greedy but its certainly in their best interest to have oil prices hover around 50. affordable enough to induce complacancy while still allowing them to have double digit percentage point surpluses.
If the oil price is kept high, that makes a lot of the other oil extraction methods economically viable (oil sand etc.) In fact, Saudis have historically increased production to lower the oil price in order to squeeze out of competition. I don't see OPEC cutting production.
I agree with the complacency issue. Probably a lot of people grabbing up the discounted Hummers, Suburbans and other gas guzzlers now that they are convinced that $3.00 plus gas was just a blip on the radar. The masses will probably vote GOP as all is ok now with the gas guzzling way of life and the invasion and occupation of Iraq. Who cares about how many Iraqis our policies have killed, just give em some cheap gas.
War in Iraq provides cheap gas? I wish it was the case consider how much money we spending on that hell hole.
Be careful though. With interest rate increases capped the stock markets are doing well and that alone can fuel a boom despite the collapsing housing market. The job market is healthy so the real question is if the loss in home equity value will shape consumer spending. If it does, yeah, we might be in for a short recession. But if consumer spending remains high, we may be set for moderate growth. As for Oil, I think anyone betting on the national average of gasoline to drop below $2 is crazy. It may dip below that in the deep of winter...but as Bush would say....make no mistake - $4 a gallon is only a year or two away.
i'm not sure if we established national average.....but i did say gas would be below $2/gallon by Christmas. i'm standing by it. you guys all thought i was crazy when i told you it would drop this far. $4 gallon isn't coming soon. we're on a trend down. we've spiked already. commodities are dropping like crazy. i do not doubt that it will eventually cycle to $4...but that's not coming anytime soon.
The midterms are getting tight gas prices are moving down Bush's poll numbers are moving up You're doing a heck of job Karl! ( I'll bet you a dollar to a donut The Carlyle Group was not caught long on gas and oil) Do you wonder why Deisel prices haven't moved down too?
I think everyone would hold their breaths during another international crisis in an oil country. Because of the growing awareness of peak oil and the emergence of China and India, public opinion has been very succeptable to a supply shortage. In reality, the appearance shortage is mostly caused through logistics bottlenecks as a result of horizontally integrated oil corporations. For the sake of efficiency and cost effectiveness, they've reduced their inventories to the point where a refinery shutdown would be felt weeks later. People would commend a company like Dell for such a system. It's different when it comes to oil. Besides, Dell and the other computer companies don't own the parts. Peak Oil promoters had good intentions, but the information goes both ways. Like the Y2K bug, there were several groups who hyped up its danger to profit handsomely from it. We've seen what its done to independent speculators. The globalized economy is at a position where small fluctations are magnified. Two years ago, China's explosive oil consumption was due to a temporary coal shortage during the winter season, which caused everyone to notice China's oil needs. They didn't match the rate the year after, yet oil prices were still climbing. OPEC doesn't have a crystal ball, and most of their members are driven by greed because of their limited reserves. Several nations are nationalizing their petroleum reserves anticipating a permanent supply shortage. While publically traded oil companies post their estimated reserves, no nation is required to give even a hint of it. Its in all of their interests to keep prices high or acceptable. This cycle is here to stay. We're seeing a fall in prices because of 'unexpected stability'. Perhaps some bet on another Global Warming induced Gulf hurricane... whatever. Oil speculators extend trends past current equilibriums, but it still temporary. It's even normal when you consider human nature. http://www.econbrowser.com/archives/2006/04/contango_specul.html
at the pump??? they have. or at least they have at the station down the street from me. commodities are falling like crazy, dubious. it's not just oil.
