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http://seattletimes.nwsource.com/html/businesstechnology/2003257679_oilconsumers14.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."
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12.804 @ 107.26 mph on crappy street tires with Dual SU Powered 2.9L Stroker!
ZCAR.COM member since Aug 1998
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allllright!
73' 240z: F54 4.2L, OS Giken LY DOHC Crossflow head, 17:3comp.ratio, N33, Tripple SU's, T10 Hybrid Draw-Through TT @ 47pds, Roots&Centrifugal Type supercharger, 3-2-1 headers, Centerforce 4 clutch, 6oz flywheel, R300 differential, Super-Hicas
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If it goes back that cheap huge SUV sales will be on once again. I personally would like to see gas stay at $3 or more per gallon to keep those POS's off the road.
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Doesnt really matter what gas prices are, I drive small cars to lifted SUV's and whatever gas prices are thats what they are. I will always drive what I want, sure it would be nice to see them drop, but no sence loosing sleep over it.
Lots of Z cars, 1970's-1983's.
1977, Megasquirt, 12.8@ 105, 1.70 60 Foot, 2940 LBS. Blake Machine Co, Phx, AZ http://bandmzcars.com http://blakemachineprojects.com http://www.zselect.com
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It's easy to find "experts" who'll claim anything: $4/gallon gas, global cooling, global warming, volcanoes in Wyoming, earthquakes in New York, tsunamis on the east coast when half of some African island slides into the Atlantic...
Finally though, an "expert" that predicts something I like. However, I think I've seen the last days of $1.15 range gas unless there's some goofy radio station doing a promo. That happened here a while back & the news reported people waiting in line for over an hour! My thought was that "anyone willing to idle in line for an hour just to get gas a tank of gas at half cost is an idiot." Sorry, running off topic.
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They doent make any money off me.. But $1.15 would be great, I may just fill up my car for the first time in over a year. No more $10 here or $10 there.
SHIFT_PPSSHHHTT... I love it, I love it
1973 240z, 2.8L Turbo, BRE Style
z31 ECCS and MAF swap
Spooled Up Racing ®
http://spooledupracing.tripod.com/home.htm
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terrorists
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Owner of the only ALL-white Shiro Special :)
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It's all a huge scam, raise the prices of fuel to some insane level then lower them to the price fuel should be then all of a sudden it seems cheap again and people spend up lol
85' 300ZX NA
86' 300ZX Turbo
88' 300ZX Turbo
89' 300ZX Turbo
300ZX Turbo Project
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It would be nice to see prices that low but I would like to see gas at $2.00 bucks even first. Baby steps, Plus you have to include inflation.
Dexter 260ZT Weee Weeeeeeeeeeee
Rebuilt 280zx engine, n/a efi, added t-3 turbo to n/a engine, n/a intake, turbo injectors, n/a afm, 83 5spd, 3.90 diff, new front end, new seat vinyl, carpet, console, 240z black diamond hatch vinyl.
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The only terrorists are the governments themselves, the American Govt has been having friendly chats with the Laden's for years. It's all a sham.
The largest nation directed by the media, and the media controlled by one organisation, they control what can be shown to the public and what can't be.
Sounds pretty fuked to me, but what can ya do. You all have no idea what is going on in the world.
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The day before the next election I see $1.99/gallon. After that it may depend on who gets elected. I said, "may." Norm K
Norman Krell
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Bring back my $1 a gallon.
Currently parting out 1990 300zx TT.
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well it's down to 2.79 were i live.i started driving the titan to work a coouple of days this week.been drivin the civic so lets keep the hope alive.
Z's are like woman maintenance,maintenance,maintenance!
1971 240Z gunmetal metalic 5sp 4:11 gears in the rear
illuminas and purchased from the original owner w/136k original miles
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It's $2.09 right now in Indy.
Dave
12/70 240Z, L-28, flat-tops, N-42 head, N-33 intake, MSA 10-2002 cam, ZX ignition, early 5-speed, R-180,4:11 gears, 903 Blue paint.
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zlion... keep driving the civic. Thats the problem... gas goes down, people drive their SUV's more, gas goes back up.
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Red 83 280zx 2+2
83 280zx Coupe SOLD
1st post 11/13/04