There's modest good news on the gasoline front for U.S. consumers, but don't write (or e-mail or text message) home just yet. Several key oil-producing nations are preparing for the prospect of $45 per barrel oil, indicating these oil exporters believe the price of the world's most important commodity is likely to fall more amid both U.S. and global economic recessions.
Saudis prep for oil's slide
Saudi Arabia, which possesses the largest proved oil reserves in the world, has passed a government budget that's prepared for $45 oil, stratfor.com reports. Meanwhile, Nigeria and Libya have reduced their 2009 oil price forecasts to $45.
Oil, which has plummeted more than 60% since hitting a record high of $147.27 this summer, fell another 48 cents to $58.85 per barrel in Wednesday morning trading.
Economist Richard Felson said the oil price plunge and the gasoline price drop it has created is good news for U.S. motorists, with certain qualifiers. "It is an astounding drop, approaching a $100 per barrel drop, and that has taken pressure off refined energy products," Felson said. "The problem is, if analysts are correct about $40-45 per barrel oil, it implies a slowdown in U.S. and global GDP that will likely mean large layoffs, which isn't good for anyone."
That said, Felson added that "at least it's better than having oil prices hang up there while major economies around the world are in recession. It's good to see that the price is responding to decreased demand."
Further, Felson did not want to minimize the positive effect of lower oil and gasoline prices on a prospective U.S. economic recovery. For every dollar that oil drops, U.S. GDP increases by $100 billion per year, and for every penny the price of gasoline drops, U.S. consumers will have an extra $600 million in their pockets, he said.
Unleaded regular gasoline has fallen from a U.S. average over $4 per gallon this summer to about $2.20-$2.30 today, with several low-cost regions of the U.S. reporting prices under $2 per gallon.
Oil Analysis: The plunge in oil prices continues. Again, as Felson noted, if a stable or rising oil price means the U.S. economy is in recovery mode, then here's to stable or rising oil prices. Further, now would be great time for the U.S. Congress to commit to weaning the country off oil and move toward alternate fuels for auto transportation.
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Reader Comments (Page 1 of 1)
11-12-2008 @ 3:13PM
gslv said...
The leftist media makes up every possible excuse for changes in oil prices. Supply and demand are NOT changing that way. It was the leftists of the Bilderberg Group who first were trying to raise oil above $200 based on their false believe about CO2 and the non-existent global warming. Now their plot has been broken. Never stop being vigilant about their next, or current manipulations.
11-13-2008 @ 12:04AM
asm154 said...
It's hard to believe there are still people like the last poster who don't understand that global warming is a scientific fact rather than a political manipulation.
Anyway, artificially raising the price of oil doesn't make a whole lot of sense right now either. Let reduced oil relieve US companies and citizens. The best thing the goverment could do is make a commitment to renewable energy with hard milestones combined with the right incentives for ramping up the re portion of its energy portfolio over the next 20+ years. This would get the re innovators and companies going, creating jobs and boosting the economy.
After all, the key to getting out of this mess is job creation. Also, if we don't ween ourselves off of oil, we'll either run out of it or trigger unmanageable climate change, whichever comes first. So putting a floor on oil prices once the economy is in recovery makes sense. But not right now.
With the current economic crisis, the problems here and now must be dealt with, but the real solutions are long-term and must be factored in.
11-13-2008 @ 1:39AM
Gary E. Sattler said...
I cut 10% off of my miles driven this week, and I left the thermostat on my oil fired furnace turned down.
Tell Chavez and OPEC I said hello.
Has anybody seen any good, wind turbine plans?