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How Low Should It Go? Analysts Predict Oil To Plunge As Low As $80 A Barrel!

Agent009 submitted on 9/3/2008 Official Bell & Ross Timestamp: 3:13:44 PM

62 user comments | Category: Misc News | Source: | SOURCE: www.businessweek.com

In recent years, energy traders plus an active hurricane season have usually meant one thing for oil: higher prices.

Yet with the departure of Hurricane Gustav, a rally for the embattled greenback is overshadowing new storm systems churning away in the Atlantic and showing how the prospect of a choppy U.S. economy is scaring traders far more these days than turbulent weather.

The price of a barrel of the benchmark West Texas Intermediate crude for October delivery dropped nearly $6 on Sept. 2, to settle at $109.71 on the New York Mercantile Exchange. That's the lowest level since early April, and a slide of $37.56 since the record of $147.27 on July 11.

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How Low Should It Go? Analysts Predict Oil To Plunge As Low As $80 A Barrel!

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It better keep dropping. After all, according to Sarah Palin, oil IS the reason why we went to war in Iraq.
— GTR35 (View Profile)

Posted on 9/3/2008 3:38:13 PM | reply to this comment | Votes: 5

McCain - Palin 2008!
— Carboy (View Profile)

Posted on 9/3/2008 5:53:37 PM | | Votes: 0

just remember, when it comes to gas prices. WHAT GOES DOWN, MUST COME BACK UP.
— S30GTR (View Profile)

Posted on 9/3/2008 11:38:26 PM | | Votes: 3

Obama - Biden 2008!
— GTR35 (View Profile)

Posted on 9/4/2008 11:35:52 AM | | Votes: 1

$75 a barrel would be a realistic price (but I bet OPEC is going to fight it going below $100 tooth and nail).
— HSCenterconsole (View Profile)

Posted on 9/3/2008 3:46:45 PM | reply to this comment | Votes: 5

Gas will be $3 a gallon in six months. Everyone who spent an extra $10,000 to get a hybrid will look stupid and SUV's will be back. Life will go on as if $4.50 a gallon never happened.
— thstone (View Profile)

Posted on 9/3/2008 3:53:48 PM | reply to this comment | Votes: -1

haha... I wish you are right, but I highly doubt it
— indifferent (View Profile)

Posted on 9/3/2008 3:59:18 PM | | Votes: 2

45MPG at $3 a gallon doesn't look stupid to me, it looks efficient.
— MBKing (View Profile)

Posted on 9/3/2008 4:01:13 PM | | Votes: 10

Thats a good one.

SUV's are dead. Their time came and went during the 90's and the first part of the new century.

Gas dropping to $80 (please do this) a barrel is still way above what we were paying just a couple years ago.

With China's economy increasing and the US not building any new refinery's since the 70's don't expect gas prices to drop to the good ole days of 1-2 dollar a gallon gas. We were artifically boosted to 4 dollar gas, however expect that to be the true rate in a few years.

Lets all remember that GAS is not the only use for Oil. Tons of Petrochemicals are made using Oil. Most of your plastics for example. So as the poputlation of the world increases the need for these goods rises, expect Oil prices to keep rising.

— Spectator (View Profile)

Posted on 9/3/2008 4:11:28 PM | | Votes: 1

The real stupid one is who would buy gas-guzzling car again after gas price drops. Haven't learned anything from the previous mistake yet?
— TopGear (View Profile)

Posted on 9/3/2008 5:28:04 PM | | Votes: 3

Spectator - yes we haven't built any refineries since the '80's but there are so many multi-billion dollar expansions to increase production going on. I'm pretty sure that none of them are gong to be complete until late 2009 though.

As far as these analysts go, they're just a bunch of circle jerks. They probably have some sort of incentive one way or another so they publicize accordingly. These analysts are probably just trying to strike fear into oil investors, which usually only works for a second or two.
— budfrogS4 (View Profile)

Posted on 9/4/2008 9:02:42 AM | | Votes: 1

I would rather have a fuel efficient car and low gas prices than be stuck with a gas-guzzler when the high prices come back.

Of course, I say this with a car that has a 17MPG average.
— S4cabriofoxone (View Profile)

Posted on 9/8/2008 1:06:45 AM | | Votes: 1

If you actually believe gas will drop to $80 a gallon, there is a bridge in Brooklyn I like to sell you cheap as well.
— topneuro (View Profile)

Posted on 9/3/2008 4:04:58 PM | reply to this comment | Votes: 0

that's quality material right there.
— MBKing (View Profile)

Posted on 9/3/2008 4:15:14 PM | | Votes: 0

Could it please just go back to 25 per barrel so that i could afford to send my kids to school in 15 years.
— NItePhire (View Profile)

Posted on 9/3/2008 4:20:36 PM | reply to this comment | Votes: 5

Wow! Same morons (analysts) predicted it to hit $180 by year end.
— vladyxa (View Profile)

Posted on 9/3/2008 4:34:21 PM | reply to this comment | Votes: 7

Oh..missed this one when I posted but Bush era will be known as Oil Frenzy!!
— Porschinator (View Profile)

Posted on 9/3/2008 4:44:32 PM | | Votes: 1

There is a well-established trend in deflated crude prices through time, and there is absolutely no reason to believe that such trend will be violated.

Although it must be noted that the actual quantitative value of that relationship is somewhat difficult to arrive at, since the CPI and PPI indexes overestimate inflation. This is why corrections are often applied under what Marilyn Vos Savant points out are referred to "hedonic quality corrections". Depending on what the value of that correction is used, the the actual real prices of crude with time can be said to be everything from slightly declining, to flat, to slightly increasing.
— cdoke (View Profile)

Posted on 9/3/2008 4:34:55 PM | reply to this comment | Votes: 1

FINITE RESOURCE is a great reason to think otherwise.
— 1995e34 (View Profile)

Posted on 9/3/2008 5:29:51 PM | | Votes: 0

This is what you do, you look up the real prices through time of metals (with the exception of gold) such as Aluminum, Copper etc.

These are finite resources, and their prices DECLINE with time, despite ever increasing usage.

Technology is not trivial, and as heterogeneous resources these metals and oil for that matter are not even subject to physical exhaustion. Decades from now when we stop producing oil, it won't be because it is astronomically expensive or we are "run out" it will because it will have no use- it will be worth NOTHING.

Before you bother me with such uneducated idiotic drivel again, I suggest you a) at least bother to do some research or b) take a natural resource economics class.
— cdoke (View Profile)

Posted on 9/3/2008 5:50:47 PM | | Votes: 1

uneducated? we burn oil, it makes it go bye bye. your comparison to metals only has value if by using the metals, they undergo thermodynamically irreversible reactions. this is my specialty.
— 1995e34 (View Profile)

Posted on 9/3/2008 9:09:24 PM | | Votes: 0

That fact does not actually change the economics. There is a man named John E. Tilton who wrote a book called "On Borrowed Time?"- read it.

I have a Master's degree in Petroleum Engineering- my focus in Graduate School- Petroleum Economics. That is my specialty.
— cdoke (View Profile)

Posted on 9/3/2008 9:29:59 PM | | Votes: 2

"That fact does not actually change the economics."

That needs a caveat- that is true now, and previously, but it won't be forever.
— cdoke (View Profile)

Posted on 9/3/2008 9:33:29 PM | | Votes: 0

...maybe. Depends on the specifics.
— cdoke (View Profile)

Posted on 9/3/2008 10:02:11 PM | | Votes: 1

how does it not change the economics? one item dissapears after use, the other doesn't.
— 1995e34 (View Profile)

Posted on 9/4/2008 9:16:24 AM | | Votes: 1

I am going to try to be fast about this- and not write 4 pages.

It doesn't really, or at least it hasn't yet. What you are talking about is recycling. Recycling in theory extends the depletion profile beyond what the primary resource figures would suggest, but it needs to be remembered that it is often not a no-loss process. Historically, there is not a lot of it that has gone on. Lead is probably the most recycled metal. Incidentally, when I talk about historical trends I am not talking about 10 or 20 or 30 years; I am talking about approximately 150 years of price information.

Here is the important stuff. To the market, it is ancillary whether or not metals or any other material produced from a finite resource that is set to be recycled had a previous life. The reason for that is that that material does not maintain its cost structure- it is actually nothing more than a new deposit each of which has its own extraction cost structure partially depending on, yes, what it turned into to be of use to society. What it actually was doesn't really matter to the market, it is a matter of the cost to extract it. Recycling is actually no different than finding a new oil deposit. A Nordhaus diagram is a good way to visualize this.

I know what your confusion is based on- you envision that years from now we won't have any oil left but we will still have Aluminium. That situation will never occur- we will never produce all of the oil. The reason for that have to do with the physics of oil extraction and the pressure depletion mechanism (to say nothing of residual oil saturation). The only difference between metals and oil is the relationship between the resource base and the reserves available to the market- i.e. some of the deposits of metals were created by man and not nature.
— cdoke (View Profile)

Posted on 9/4/2008 12:00:02 PM | | Votes: 2

@cdoke: fair enough--we won't actually run out of oil or aluminium...but how is the economics not affected? If the extraction method changes, it's reasonable to assume that the cost for extraction changes, too, right?

— DW1968 (View Profile)

Posted on 9/6/2008 1:29:33 AM | | Votes: 1

That is exactly why it is treated as nothing more than a new deposit with different costs. It is not necessarily less costly to recyle, incidentally. The market behaves exactly the same in both circumstances, and firms behave in exactly the same manner in both circumstances.
— cdoke (View Profile)

Posted on 9/6/2008 2:13:49 AM | | Votes: 1

I cannot find the specific diagram that I think would help online, it is in Dr. Tilton's book though (pg. 27)
— cdoke (View Profile)

Posted on 9/6/2008 2:18:39 AM | | Votes: 1

...except that diagram does not include a backstop...
— cdoke (View Profile)

Posted on 9/6/2008 2:19:58 AM | | Votes: 1

Those same economist predicted oil to hit $200 a barrel by years end too....whatever...lol..
— Porschinator (View Profile)

Posted on 9/3/2008 4:43:30 PM | reply to this comment | Votes: 3

cheap oil could lead to the downfall of america as we know it. if its cheap, we waste it. its a finite resource we can't afford to waste.
— 1995e34 (View Profile)

Posted on 9/3/2008 4:58:09 PM | reply to this comment | Votes: -2

I hope it hits 40-50 a barrel, but no matter what, we need to make sure that gasoline doesn't go below $2.75 a gallon. If you ask me (and I'm no PhD econ grad), at $2.75 a gallon people will be more more fuel-concious, while people who need big trucks and SUVs wont get stomped on at the pump.

Also, a better taxing system would help control demand. At the same time, as a people/govt, we need to sit down and select the best alternatives and give them priority (i.e. algae biopetroleum). I'd rather be paying $60 a barrel for biopetroleum than $40 a barrel that goes to saudi arabia.

Sad, we can talk and talk, but the real criminals are the speculators and their political lackies.
— neutral (View Profile)

Posted on 9/3/2008 5:07:52 PM | reply to this comment | Votes: 1

i didn't see people get fuel conscious until AT LEAST $3.50/gallon. $4.00/gallon really did the trick though.
— 1995e34 (View Profile)

Posted on 9/3/2008 5:27:36 PM | | Votes: 2

Three comments ago... A message for Cdoke.. This conversation was extremely sophisticated before you posted. Thanks for your lame, yet upscale version of every other comment. Next.
— drake0707 (View Profile)

Posted on 9/3/2008 5:27:34 PM | reply to this comment | Votes: -1

I try to avoid being mean, but I think I shall make an exception.

Crawl back into the gutter that your family pulled themselves out of.
— cdoke (View Profile)

Posted on 9/3/2008 5:52:50 PM | | Votes: 2

I predict it will go down to $70 a barrel.
Oil will be a big loser in the upcoming 2-4 years. Here's why:

1. The public's attitude about energy has significantly shifted towards more economical means.
2. Automakers are scrambling to make their cars as efficient as possible and we have now the largest number of fuel efficient vehicles ever, and all eelctric cars within the next 4 years will be a very common sight.
3. We now have a HUGE clean energy movement in America like the 10 year plan proposed by some to rid the country of foreign energy dependence. Its not to save mother earth, its to save mother bank account.
4. The rise of the dollar against the Euro has finally begun. See current prices. Stronger dollar means lower oil prices (since oil is traded globally in USD$)
5. Stricter Regulation will have speculators think twice before inflating crude prices.
6. European economic recession forcasted will take an even further toll on global demand

Its all a beautiful thing. Though we may not yet know it, the redical rise in crude prices may have been the best thing to happen to America in decades. History shows that all downturns are followed by rapid expansion and growth. Hang on guys, we are getting there.
— w209w114 (View Profile)

Posted on 9/3/2008 5:29:27 PM | reply to this comment | Votes: 3

Once gas goes down to 70 a barrel and its 3 bux. All of that will be forgotten and neglected. Only in a crisis things change. It has to rise for those things to keep going.
— candywhite (View Profile)

Posted on 9/3/2008 6:45:13 PM | | Votes: 2

candywhite.

Although I used to believe the same, I now realize that the public's opinion has PERMANENTLY changed. We no longer trust the oil market and dont like the idea of being at its mercy. Same goes for automakers.
— w209w114 (View Profile)

Posted on 9/4/2008 1:39:56 PM | | Votes: 2

w209, all I have to say is, I hope you're right. I hope people really have changed.
— S4cabriofoxone (View Profile)

Posted on 9/8/2008 1:10:22 AM | | Votes: 1

We're pulling the troops out of Iraq and oil is coming down to $80 bucks a barrel.

This will drive the Obama Libs nuts.

:-D
— EL34 (View Profile)

Posted on 9/3/2008 6:45:59 PM | reply to this comment | Votes: 1

bimmerfan25, you need to get out of the past. I'm a McCain/Palin fan.

hahahahaha I love democrats.

your tears fuel me

E .• ` ' / •. F
— EL34 (View Profile)

Posted on 9/3/2008 9:21:11 PM | | Votes: 3

For all of your BS...bimmer...it sure is funny you FIRED the socialist and enlisted a Conservative (Merkel) to run your country....

What's the unemployment rate in your country again?.....10.2%
..TWICE that of America.

Yeah...you're doing just great. Keep on bussing you compadres over to the U.S. for surgery...we love all of the business.

Too bad you guys can't do it for yourselves.

— BMW740Z4 (View Profile)

Posted on 9/4/2008 12:17:10 AM | | Votes: 4

Bimmerfan,

Theres a recession coming your way! and it has our name on it. Enjoy it! Euro drops even more, Every Major Euro Stock Market is down 20-30% this year, Housing slump in Spain, England, and others with double digit effects. Interest rates remain high. And the ECU is scared of inflation. Im not wishing you luck because you think you have it all ;)
— w209w114 (View Profile)

Posted on 9/5/2008 4:15:29 PM | | Votes: 1

I wouldn't hold my breath, give it a month when they start predicting a colder than expected winter or another hurricans cropes up or OPEC cuts production, then speculators will inflate oil right back up again.

When the US economy goes up, China's consumption goes up followed by oil.
— huu76 (View Profile)

Posted on 9/3/2008 6:47:29 PM | reply to this comment | Votes: 1

I wouldn't set my money on oil to stay at $3 a gallon. Eventually inflation will get to all of us. The sudden oil price surge put alot of people into financial trouble. I still think that the US needs a new way to meet American oil needs. The middle east is benefiting from our oil consumption.
— M1k3 (View Profile)

Posted on 9/3/2008 7:14:18 PM | reply to this comment | Votes: 2

will you please just stop commenting...your typical rants are just a waste for everyone else...you claim other people are sheep, but nothing you are saying is an original thought...please just go away.
— GodfatherSHM (View Profile)

Posted on 9/4/2008 9:11:10 AM | reply to this comment | Votes: 1

bimmerfan,
Obamas a fake. Obama's 10% in 10 years sounds a lot like Bush's 10in20 (10% reduction by 2020) that he proposed last year. Or the off-shore drilling that McCain was all for before Obama decided he was too?

10% of US oil consumption from the middle east. Bush/McCain's plan would elminate that. The only people making the Middle East rich are the Europeans who like to have the US guarantee their oil.

Anyway, there are another 2 hurricanes coming so up we go.
— huu76 (View Profile)

Posted on 9/3/2008 10:31:35 PM | reply to this comment | Votes: 3

this is not a good news, i want gas to stay up
— pchera01 (View Profile)

Posted on 9/3/2008 10:53:32 PM | reply to this comment | Votes: -1

Drilling is the answer along with developing every other energy source we can (solar,wind, nuclear, natural gas). Do it all.

If U.S. Congress lifts the ban on offshore drilling...there is no telling how far it will drop.
— BMW740Z4 (View Profile)

Posted on 9/4/2008 12:19:35 AM | reply to this comment | Votes: 4

bimmerfan25,
Are you troll or are you really as uninformed as you portray yourself? Your unused drilling permits line is nothing but a bogus democratic talking point long since debunked. As for your boasts of European love for Barack Obama, you're too arrogant and narrow-minded to realize that this is all the more reason not to vote for the inexperienced fraud. America is not Europe, and it doesn't desire to be. The US was founded by freedom-loving people fleeing repressive European rule. Yours is a dying continent living off its past. Americans want a president acting in our best interests, appointing judges that look to our Constitution, not int'l law. You are drawn to Obama because you recognize a socialist when you see one. You can have him and David Hasselfoff too. Let me leave you with a bit of sage advice bimmerfan25 : Trade your Euros for US dollars asap.
— fuelfool (View Profile)

Posted on 9/4/2008 3:00:36 AM | reply to this comment | Votes: 4

I have to admit that in this election, I find the timing of Thomas Sowell's book "Economic Facts and Fallacies" to be very appropriate. I hope those who do read this book have committed Obama's acceptance speech to memory, so the two may be compared- a disturbing exercise to say the least.

Sowell's book is rather dry in places, admittedly, in fact if you want more concrete examples "The Power of Logical Thinking: Easy Lessons in the Art of Reasoning... and Hard Facts About its Absence in Our Lives." by Vos Savant is very good. It was written in 1996 and contains a section about how politicians exploit out innocence with examples from the '92 election. If you idolize Clinton or Gore you might not like what is said, though (I don't mean to imply that it is one sided).

I can say, I think that if bimmerfan were in his right mind, he wouldn't dare call these two stupid.
— cdoke (View Profile)

Posted on 9/4/2008 12:41:54 PM | | Votes: 2

Americans are the biggest consumer of oil in the world. I hope americans learned a lesson from these record high prices by using less oil and switching to more fuel efficient cars and occasionally using mass transport, just like the rest of the world is doing.
— stelvio (View Profile)

Posted on 9/4/2008 9:29:20 PM | reply to this comment | Votes: 1

The lower the better
— Cornholio852 (View Profile)

Posted on 9/19/2008 4:15:13 PM | reply to this comment | Votes: 1

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How Low Should It Go? Analysts Predict Oil To Plunge As Low As $80 A Barrel!

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