Gasoline Could Go As Low as $1.15 a Gallon, Analyst Says

PlanoA4 submitted on 09/14/2006 Official AutoSpies Timestamp: 4:19 PM
from: www.miami.com

[37] user comments | category: Misc News

Tags: Gasoline

Gasoline

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.

Consumers already have been seeing falling prices at the pump: an average $2.78 in Miami-Dade and $2.79 in Broward, down from more than $3 last month.

''All the hurricane flags are flying'' in oil markets, said Philip K. Verleger, a noted energy consultant who was a lone voice several years ago in warning that oil prices would soar. Now, he tells McClatchy News Service, 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 per barrel. Oil closed Wednesday at $63.97, 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 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 oilproducing neighbors and the prospect that hurricanes might topple oil facilities in the Gulf of Mexico.

Oil traders bet 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. Financial players, such as 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 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.

All this is turning 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 a gallon, according to the American Automobile Association.

Should oil traders fear that this downward price spiral will get worse and run for the exits by selling off their futures contracts, said Verleger, 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.

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webguy - 9/14/2006 4:37:14 PM

+1 Boost

I'll believe it when I see it.

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BavarianMotorrad - 9/14/2006 5:17:04 PM

+4 Boost

jtgct: "please, no more bitching about big oil and the war"? Give me a break ya idiot.... Get back to your delusional world of reading Guns & Ammo wearing your grandma's panties. Dumbest post I have ever heard.

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Designer1 - 9/14/2006 5:33:25 PM

+1 Boost

Keep dreaming, it will settle down for lowest $2.5, then in March will jump again to over $3, and by 2008 we'll be happy to see it stopping at $3.

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gearguru - 9/14/2006 5:43:33 PM

+1 Boost

When have analysts ever been right? They just tell you what you want to hear so you stop concentrating on the topic at hand.

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CommonSense1 - 9/14/2006 6:37:14 PM

+1 Boost

"please, no more bitching about big oil and the war" Good idea. As so many people forget oil is a commodity, you have the OPTION to buy it. If you have become overly dependant then that is your fault. Carpool, buy a more efficient vehicle, or more to a big city and use mass transit. I seriously doubt $1.15 gallon gas, but $2 I can believe

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matt635 - 9/14/2006 6:38:21 PM

+6 Boost

Ha, don't make me laugh, you yanks don't know you're born....

UK... 95p/litre

4.54 litres/gallon = £4.31/gallon

@ current exchange rate = $8.12 per gallon.

And you guys think $3+ is expensive. What planet are you on?!? no wonder the americans can't make efficient engines!!

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matt635 - 9/14/2006 6:42:46 PM

+3 Boost

infact jtgct this post is aimed at your..

You try drivin a car that only get 17mpg in England - it'll rip your wallet a new ass-hole, which will permanentley crap out money. don't give us that 'buy a more economical bar' bollocks... You guys want to wage war thats fine - I'm not about to get political, but don't claim that it helps 'gas' prices, it might for you.. but we lost troops too, and it's done dick all for us.

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CommonSense1 - 9/14/2006 6:56:29 PM

+4 Boost

Matt-
must agree. my suggestion to buy a more economical car was aimed at those persons complaining about $3 gas. I lived in europe for 2 years, their prices make ours look like a bargin... LESS THAN HALF!!! All wars are stupid we don't need to go down that road.

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Marcus - 9/14/2006 7:29:29 PM

+1 Boost

Why do Americans think that it is their "God given right" to suck up all the Earth's fuel?

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pchera01 - 9/14/2006 7:46:00 PM

+2 Boost

where i am, it is already at $2.09, and faling, since last sunday it fell $0.15
I have big hope it will be back to $1.15
two reason
I have Armada and in Motel business

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The_Dude - 9/14/2006 8:05:50 PM

+3 Boost

These irresponsible repubs have led to our dependence on oil. They're all a disgrace to anything fine & decent in the world.

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1995e34 - 9/14/2006 8:40:40 PM

+2 Boost

the dude, i look for any reason i can to knock the repubs, but i don't know if i can blame them for our dependance. every industrialized nation is dependant. but i can knock em' for not investing in efficiency, and creating ww3.

i wanna know where these $2.09 gas stations are...

i actually think it will greatly benefit the europeans in the long run to have expensive gas. it forces them to be more efficient as a society. if we had a major global oil crisis tommorow, they would be in much better shape to adapt to it.

when i got my driver's liscence, gas was $0.89/gallon. i would love to be able to fill my tank for $20, but having to shell out almost $60 to fill a mid-size sedan is a bit of a reminder of the cost to the environment, so i NEVER bitch about $3 gas

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chewy - 9/14/2006 9:38:58 PMView My AgentSpace

+1 Boost

Last time gas was so cheap was about 5 years ago. Either we have been gouged the whole time, or some automaker/s (cough cough) want to get people to buy their gas guzzling (not gas guzzler tax paying) SUVs and pickups.

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monkeyrun - 9/14/2006 9:48:02 PM

+1 Boost

It's "could" but it won't ...

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NYC45 - 9/15/2006 12:08:04 AM

+3 Boost

Yeap, i see everybody running to their dealers to get the latest SUV.

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delan - 9/15/2006 12:26:19 AMView My AgentSpace

+1 Boost

matt635 said "don't give us that 'buy a more economical bar' bollocks..."
------------------------------
tee hee, he said bollock :-)

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pchera01 - 9/15/2006 1:15:23 AM

+1 Boost

1995e34, its in OKC

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Aldairion - 9/15/2006 2:45:32 AM

+2 Boost

My BS meter is going nuts...this will be bad. Cheap gas will last for about a day, because everyone will see it...and then go nuts and buy large, gas-guzzling vehicles...supply will drop again, and there you go...back to $3 gas.

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jasongoudie - 9/15/2006 9:41:17 AM

-1 Boost

Awwww.... The european socialists complaining about America having cheap gas prices. Where I live it is $2.08 per gallon. What is the matter euro's feeling the pain of your failed 3 world socialist economies. Let's tax the hell out of gas because it is evil and contibutes to Global Warming (still not proven)!! With these gas prices falling it looks like I will have to go get a bigger SUV. What everyone doesn't seem to get is spikes in the market happen every 10 years or so. A barrel of oil has hovered at or under $35 for the past 50 years. The spike was due to China eating up all of the inventory. Now that they have compensated for it the price will go down. Don't you get it OPEC is also protecting their assets. There were a lot of companies and industries starting businesses to get out of this prediciment (ie... capitalism, alternative fuels, cars, coal to liquid fuel). So the arabs aren't stupid they are trying to beat capitalism to protect their assets. They got away with it for a little while and may for a little while longer but the market will correct itself. That's the way capitalism works.

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gkearns - 9/15/2006 10:52:18 AM

+1 Boost

I don't see gasoline prices dropping to $1.15 per gallon. The eastern countries with OPEC (along with our reliance on their gas) will always keep the prices above $1.15. I could see $2.20, $2.30 or something in that neighborhood but not that low.

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krzykarl - 9/15/2006 11:28:20 AM

+1 Boost

Question.....

Isnt gas taxed insanly on the other side of the pond? And thats why its so high.... I thought they didnt have a income tax like we do so the goverment taxed the crap out of gas... I am probaly wrong but im sure you guys will let me know...

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DarkOneForce - 9/15/2006 12:13:08 PM

+1 Boost

Well for starters:

1. not were I'm living, in the good old european continent
2. don't worry my american friends, gas price WILL go up again.

You see, before, you didn't really have to worry about
China, India, (and in the future Indonesia) as well as
terorist organizations like AL-Quaida and their alliance network, oh and Chavez and that new guy.

3. So welcome to the real world.

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BimmerFan - 9/15/2006 1:33:47 PM

+1 Boost

When pigs fly out my arse, I will let you know....because that is an indicator that gas has gone down to $1.15 a gallon!

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Rupert - 9/15/2006 2:28:19 PMView My AgentSpace

+1 Boost

krykarl, we get taxed a huge amount.
income tax, VAT (tax on goods) fuel tax, company car tax, VAT on fuel (tax on tax), inhertiance tax etc.
where doesn't have income tax?

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lenkun - 9/15/2006 3:26:35 PM

+1 Boost

I thought 1 gallon = 3.81 liters? I guess the English liter is smaller than the american liter?

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Rupert - 9/15/2006 4:22:32 PMView My AgentSpace

+1 Boost

no, american gallon is smaller than british gallon, its not that mcuh here. aorund $6.50 per american gallon, i think.
europe invented litres anyway, lenkun!

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1995e34 - 9/16/2006 12:57:17 AM

+1 Boost

rupert, in the states, we get federal and state taxes. federal tax is for everyone. state tax is determined by given states. needless to say, if you don't pay income tax, you get taxed somewhere else instead; property tax or whatever. roads don't build themselves.

american gallon is 83.267% of british gallon. liters are the volumetric measurements of the s.i. system (international).

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biobenz - 9/16/2006 1:06:39 AM

+1 Boost

I dont know if prices will fall I kind of hope they dont even though I sometimes have to travel the vast spanses of the US but I do know that petrol is running out oil companies manipulate prices to suit their needs and car manufacturers governments and oil producers are in cahoots to suck it dry and minionize the masses ..... the american dream is a fabrication made up by those with the most to gain

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1995e34 - 9/16/2006 1:20:41 AM

+1 Boost

the higher gas prices are, the more incentive there is to invest in new methods of generating power. i don't HOPE that gas is instantly as expensive in the states as in europe, but i think having it cheap is not helping our dependance.

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huu76 - 9/16/2006 1:03:00 PM

+2 Boost

jtgct,
Perhaps diesel fluctuates in the U.S., but it hardly moves in Canada. It's been sitting at $0.99 for over a year now. It was at $1.09 when gas was $1.19 last summer. Gas in Toronto is $0.74 on avg today.

Lower gas prices hurts diesel sales more. Hybrids may lose their appeal, but you'll recoup the extra cost quicker with lower gas prices (more mileage on even cheaper gas). Diesel will continue to cost more no matter what happens with gas (inflation has now factored in higher transportation costs, so there's no reason to drop diesel prices).

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huu76 - 9/16/2006 7:59:19 PM

+2 Boost

Darkforce,
Canada has the 2nd largest oil reserves on the planet (all for us, us being Canada and the U.S.). I think it's best Europe secures their own oil.

Oil may be priced globally, but N.America doesn't have to worry about actually running out (like Japan/China/Europe does).

Venezuela can sell oil so long as the U.S. doesn't blockade them. One problem of pissing off the last superpower, payback will be a bitch.

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huu76 - 9/16/2006 8:01:52 PM

0 Boost

Should be interesting to see how much fun Germany and France have getting middle east oil, or bidding against China/India for Russian oil.

If the U.S. ever left the region, the know-nothing liberal idiots in Europe would be paying 3x as much to fill up their diesels :)

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huu76 - 9/16/2006 8:03:27 PM

+1 Boost

I'm sure the U.K. would be granted access to our oil if they needed it, Japan as well.

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