I'd really like to see this happen

[Saddle Bronc 124]

http://seattletimes.nwsource.com/html/busi...onsumers14.html

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."

Last I remember gas at that price ($1.15/gal, regular) is around 2000 or early 2001.

[Hilarious Clinton 452]

I'm definitely buying that H2 now.

my new grocery wagon..

[Peter Miami 1]

It would be very nice but I doubt we will ever see it.

Peter Miami

[Jenn! 918]

I filled up at $2.17 today.

[Peter Miami 1]

I filled up at $2.17 today.

Where? In what country or state? It is $3.05 in Miami.

Peter Miami

[Jenn! 918]

I filled up at $2.17 today.

Where? In what country or state? It is $3.05 in Miami.

Peter Miami

just outside of Boston!

[Jasman0717 9]

I would love to see $1.15 but the big greedy oil companies won't let that happen, not enough profit per gallon for them.

[Ban Hammer 14,382]

I filled up at $2.17 today.

Where? In what country or state? It is $3.05 in Miami.

Peter Miami

$2.31 here in kansas, so that means missouri is about $2.25

[MrsWhizz 0]

I'm definitely buying that H2 now.

my new grocery wagon..

And that's exactly why gas prices are they way they are.........

(just incase anyone missed your sarcasm...I hope it was sarcasm...)

[Peter Miami 1]

I filled up at $2.17 today.

Where? In what country or state? It is $3.05 in Miami.

Peter Miami

$2.31 here in kansas, so that means missouri is about $2.25

Wow, nice!

Peter Miami

[Aymerlu 3]

I filled up at $2.17 today.

Where? In what country or state? It is $3.05 in Miami.

Peter Miami

$2.31 here in kansas, so that means missouri is about $2.25

2.19 in Missouri (Columbia)

[Welshcookie 17]

$6 here!!!. .........ok....I am in the UK

[danae 0]

I'm definitely buying that H2 now.

my new grocery wagon..

And that's exactly why gas prices are they way they are.........

(just incase anyone missed your sarcasm...I hope it was sarcasm...)

Urrgh I just HATE those things. And so so ugly! I dont get it at all

[AnaAndDaniel 0]

2.76 in the Sacramento California area.

Daniel

:energetic:

[mrsushi66 0]

2.35 indiana