[Rhodes22-list] Good News - Gas Prices Falling

[Brad Haslett]

Saroj,

Maybe, I don't agree with all the premises of the article but everything
does line up for a fall, just not as far as the author suggested.  The
unfortunate repercussion is that it will encourage us to go back to our
foolish ways.  Peak Oil is coming!  The folks who have the most oil are
still the same folks who hate us the most.  The two fastest growing oil
consuming nations, China and India, aren't slowing down. China doesn't give
a shit about anything but China, and they're cutting deals everywhere for
every commodity.  I can't make my jet or our equipment burn less fuel, but
my next car *will *get 50mpg+.  Hopefully it won't smell like shrimp.

Brad


On 9/15/06, Saroj Gilbert <saroj at pathfind.net> wrote:
>
> That would be good news...
>
>
> ----- Original Message -----
> From: "Brad Haslett" <flybrad at gmail.com>
> To: "The Rhodes 22 mail list" <rhodes22-list at rhodes22.org>
> Sent: Friday, September 15, 2006 9:23 AM
> Subject: [Rhodes22-list] Good News - Gas Prices Falling
>
>
> <http://seattletimes.nwsource.com/html/home/>
>
> Thursday, September 14, 2006 - 12:00 AM
>
> *.*
>
> **
> *
> **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 fighting 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 Associates, 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."
>
> <http://seattletimes.nwsource.com/news/general/copyright.html>
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