The purpose of this section is to show the causes and effects of long-term price
changes; however, it is somewhat interesting to follow the recent series of steady price increases to see
how quickly the price went up, and how alarmed the news media was when it did.
The newest items are at the bottom, so there may be some broken links near the top.
Oil, Gasoline
Decline on Report of U.S. Fuel Supply Increase. Crude oil fell more than $1 a barrel and
gasoline plunged after an Energy Department report showed an unexpected increase in U.S. inventories of
the motor fuel. Stockpiles rose 402,000 barrels to 205.8 million last week, the report showed.
Oil Rises to
Record $94.74 as U.S. Supplies Fall to 2-Year Low. Crude oil rose to a record $94.74 barrel in
New York after an Energy Department report showed that U.S. inventories fell to a two-year low. Today's
4.6 percent gain was the biggest since Jan. 30.
Oil price may hit $100 in
days. Oil rose above $96 overnight [11/9/2007] on winter fuel supply concerns, a tumbling US
dollar and big options positions betting oil could strike $100 next week. US crude rose 70 cents to
$96.16 a barrel by 1906 GMT, off earlier highs of $96.68 a barrel.
Oil
crosses 96 dollar a barrel. New York's main futures contract, light sweet crude for delivery in
December, was trading at 95.64 dollars a barrel, up 1.11 dollars, or 1.2 percent, from its close of
94.53 dollars a barrel in US trades. It also smashed Wednesday's record of 94.74 dollars.
Oil prices ease as OPEC lowers
demand forecast. World oil prices fell slightly Thursday [11/15/2007] as OPEC lowered its
estimate for demand growth and ruled out a hike to crude output. The market was meanwhile preparing for
weekly government data on the state of US energy stockpiles. New York's main contract, light sweet crude
for December delivery, dropped 26 cents to 94.64 dollars per barrel. In London, Brent North Sea
crude for December delivery lost 48 cents to 90.88 dollars per barrel.
Oil prices slide.
World oil prices fell sharply overnight [11/16/2007] on easing supply concerns as OPEC lowered its estimate for
demand growth and the US government revealed a surprise increase to crude stockpiles, traders said.
Oil reaches new record above $99.
Oil prices came close to breaching the $100 a barrel mark on Wednesday [11/21/2007] as the dollar remained
weak, tempting traders towards commodities.
Oil
prices hit closing record: $98.18. Oil futures resumed their march
toward $100 a barrel Friday [11/23/2007], rising to a record close in light holiday trading
on concerns about tight heating oil supplies while also drawing support from a buoyant stock
market.
Crude Oil Falls
Below $90 on Concern Economic Growth Will Slow. Crude oil fell below $90 a barrel in the biggest
weekly loss in two and a half years on concern slowing economic growth will cut energy demand, and as Saudi
Oil Minister Ali al-Naimi said supplies in the market are "ample."
Oil prices
slump under $88. Oil prices tumbled under $88 overnight, with all eyes on the
forthcoming OPEC output meeting in Abu Dhabi as sentiment turned on whether there will be a
production hike or not. OPEC, which pumps about 40 percent of the world's oil, was
due to meet in the United Arab Emirates capital tomorrow [12/6/2007].
Oil hits $100 a barrel for the
first time. Oil prices rose above the symbolic level of $100 a barrel for the first time on
Wednesday [1/2/2008], a long-awaited milestone in an era of rapidly escalating energy demand. Crude oil
futures for February delivery crossed the $100 threshold on the New York Mercantile Exchange shortly after
noon New York time, before falling back slightly. Oil prices, which had fallen to a low of $50 a barrel
at the beginning of last year, have quadrupled since 2003.
Oil falls near $90 on
recession fears. Oil slipped toward $90 a barrel on Thursday [1/17/2008] amid growing fears the
U.S. economy will slip into a recession and hurt demand from the world's top energy consumer. The loss
stretches oil's slide to about 10 percent since the record over $100 a barrel hit January 3, taking
pressure off of producer-group OPEC to boost output at its next meeting in February.
Oil soars to record above
$US100. Oil prices settled over $US100 for the first time, as a potent combination of supply
concerns pushed crude into record territory. … Futures surged early in the session on an explosion at
Alon USA's Big Spring, Texas refinery that occurred on Monday [2/18/2008]. Damage assessments indicated
that the refinery would be out of commission for weeks or months.
North Slope crude market cracks $100-barrel barrier.
The price of Alaska oil blew past the $100 mark Tuesday [2/26/2008], extending an incredible run that's enriching
not only oil companies but the state. "I'm not astonished anymore," said Michael Williams, the state's
chief economist and a longtime observer of oil markets.
Oil price hits new record.
World oil prices hit a new record of $101.32 a barrel in Asian trading today [2/21/2008] on renewed concerns
over global crude supplies, dealers said. New York's main oil futures contract, light sweet crude for
delivery in March, closed overnight up 73 cents at an all-time high of $100.74.
Oil Shoots Up to $102 Per
Barrel. Crude prices rebounded Thursday [2/28/2008], shooting up more than $2 a barrel
to a new record as a falling dollar and the prospect of lower interest rates attracted fresh money to the
oil market. Retail gas prices, meanwhile, rose closer to records above $3 a gallon.
Oil Is Little
Changed After Rising Above $102 on Weak Dollar. Crude oil traded little changed after earlier
rising above $102 a barrel, the highest ever. Gold advanced to a record as a weakening dollar spurred
investors to buy commodities as a hedge against inflation. Futures jumped in New York and London as
the dollar fell to $1.50 per euro for the first time.
Oil Advances to Record $105.97 as
Dollar Drops to All-Time Low. Crude oil rose to $105.97 a barrel, the third day this week New
York prices have reached a record, as the U.S. dollar fell to its lowest ever against the euro. Gold and
copper also advanced to all-time highs as the sinking dollar made commodities priced in the U.S. currency
cheaper. Oil closed at a record yesterday [3/5/2008] after U.S. crude inventories fell for the first time in
eight weeks and OPEC refrained from raising production.
Crude Oil Rises Above $108 to
Record as Returns Outpace Stocks. Crude oil rose above $108 a barrel in New York to a record as investors
purchased futures because the returns have outpaced those of financial markets. … Crude oil for April delivery rose
$2.75, or 2.6 percent, to close at a record $107.90 a barrel at 2:47 p.m. [3/10/2008] on the New York Mercantile
Exchange. Futures surged to $108.21 a barrel today, the highest since trading began in 1983.
Oil crosses record $110, despite
supply rise. Oil prices rebounded to another record high Wednesday afternoon [3/12/2008] after
initially plummeting when a government report said supplies of crude and gasoline had risen much more than
expected. In afternoon trading, U.S. light crude for April delivery surged to a high of $110.20 before
closing at $109.92. Oil had traded as low as at $107.09 following the report's release on Wednesday
morning [3/12/2008].
Oil prices plunge after hitting new record high. Oil
prices plunged Monday [3/17/2008], pulling back at least temporarily from record levels as investors feared that the
financial crisis that forced the sale of Bear Stearns Cos. is a sign of deep economic trouble.
Oil
extends slide on economic worries. Oil prices extended a week-long slide on Thursday [3/20/2008],
briefly tumbling below $100 a barrel for the first time in two weeks amid growing concerns an economic slowdown
in top consumer the United States would cut global energy demand.
Oil to stay within $US110, says
OPEC. Oil prices will range between $80 and $110 per barrel for the rest of 2008, OPEC President Chakib
Khelil says. Mr Khelil, who is also Algerian energy and mines minister, said on Algerian television that OPEC was
under "big pressures" from consuming nations who liked to portray the group as responsible for high oil prices, when in
fact the market was responding to US economic problems and the falling dollar.
Oil tops $107 after Iraqi pipeline bombed. Oil
prices rose by more than a dollar Thursday [2/27/2008], as the bombing of a key Iraqi pipeline extended a
buying spree spurred by an anemic dollar and lower U.S. fuel inventories.
Oil Rises Above
$107 After Iraqi Pipeline Blast Curbs Supply. Crude oil rose above $107 a barrel in New York
after a pipeline explosion in southern Iraq cut supplies to the country's main export terminal. The
Iraqi oil ministry didn't yet know the cause of the blast on the Zubair-1 pipeline, one of two that transport
oil to the Basra terminal, an oil ministry official said.
Oil prices head towards
$US110 a barrel. Oil prices rose more than 2 percent overnight as weakness in the US dollar
following a batch of soft jobs data outweighed fears of a demand slowdown in the world's biggest energy
consumer. News of a fire at an Exxon Mobil refinery in Los Angeles supported the gains, sparking fears
over gasoline supply heading into the summer driving season.
Oil Rises,
Gasoline Surges to Record on U.S. Fuel-Supply Drop. Crude oil rose more than $3 a barrel and
gasoline surged to a record after an Energy Department report showed that U.S. supplies of the motor fuel fell
a third week. Gasoline stockpiles declined 4.53 million barrels to 224.7 million barrels last
week, the biggest drop since August, the report showed.
Oil prices rise to new high above $112. Oil
prices rose to an intraday trading record above $112 a barrel Tuesday [4/15/2008] as the U.S. dollar fell
against the euro and crude oil shipments along one U.S. pipeline were said to be operating below capacity.
Light, sweet crude for May delivery on the New York Mercantile Exchange rose to an intraday record of
$112.80 a barrel in electronic trading by early afternoon in Europe, well above the previous trading
high of $112.21 set last week.
Crude Oil Rises Above $117 as
Attackers Cut Nigerian Supply. Crude oil in New York rose to a record above $117 a barrel after attacks cut
Nigerian output and the dollar dropped against the euro. … "We are clearly headed over $120 a barrel and we are targeting
$125," said John Kilduff, vice president of risk management at MF Global Ltd. in New York. "The last thing we need
is another supply disruption. The outage certainly adds to the bullish sentiment."
Crude Oil Rises
to All-Time High Above $119 on Record Euro. Crude oil rose to a record $119.90 a barrel in New
York as the dollar dropped to an all-time low against the euro, prompting investors to purchase commodities
as an inflation hedge. Oil gained as the dollar touched $1.60 per euro for the first time after European
Central Bank policy makers signaled they may raise interest rates because of inflation. Crude's
24 percent surge this year pulled gasoline and diesel to records, weighing on an economy already
reeling from a credit crisis.
Oil hits fresh high as biofuels rethink looms.
Expectations rose on Tuesday that soaring food prices will provoke a rethink of support for biofuels in Europe
and the US, as the price of oil hit a new high of almost $120 a barrel.
Oil prices recede after setting record above $117.
Retail gasoline prices hit another new milestone today, jumping to an average $3.50 a gallon at filling stations across the
country. Crude oil prices, meanwhile, set new records of their own, spiking above $117 a barrel after an attack on a
Japanese oil tanker in the Middle East.
Oil falls more than $3 on weaker
demand. Oil prices fell more than $3 a barrel today [4/29/2008] as the market absorbed data
showing demand is falling even as supplies are rising. Meanwhile, gas prices inched higher at the pump,
continuing their record-breaking press toward $4 a gallon.
U.S.
stocks fall; Oil surges past $120. U.S. stocks fell on Monday [5/5/2008] as resurgent oil prices set a record
over $120 a barrel and doubts about Bank of America's plan to buy the largest U.S. mortgage lender renewed concerns about
the nation's economic health.
Oil nears $123 on $200 oil prediction, supply concerns.
Oil futures blasted to a new record near $123 a barrel Tuesday [5/6/2008], gaining momentum as investors bought on a forecast
of much higher prices and on any news hinting at supply shortages. Retail gas prices edged lower, but appear poised to
rise to new records of their own in coming weeks.
Gas and oil prices continue to set records. Oil
prices shot to a new record near $127 a barrel Tuesday [5/13/2008] on concerns that Iran may consider cutting
crude oil production. Gas prices, meanwhile, rose to a new record over $3.73 a gallon Tuesday, and their
advance shows little sign of slowing with Memorial Day weekend, the traditional start of the summer driving
season, just 10 days away.
Oil settles above $129 for first time.
Just in time for the start of the summer driving season: Oil near $130 a barrel and gas getting closer to an
average of $4 a gallon. Crude prices spiked to yet another trading high Tuesday [5/20/2008] as supply
concerns mounted. At filling stations across the country, the national average price for a gallon of
regular gasoline touched $3.80 for the first time, having followed oil's spectacular rise.
Oil prices pass $132 after
government reports supply drop. Oil prices bolted to a new record above $132 a barrel Wednesday
[5/21/2008] after the government reported that supplies of crude oil and gasoline fell unexpectedly last week.
And crude's rise in the futures market again pressured consumers by pulling prices at the pump higher — a
gallon of regular gas rose overnight to a new record above $3.80 a gallon.
Oil Rises to a
Record After Pickens Says Prices May Reach $150. Crude oil rose above $129 a barrel in New York
for the first time after billionaire hedge-fund manager Boone Pickens said oil will reach $150 a barrel this
year because supply isn't keeping up with demand.
Oil above $133 on Nigeria,
North Sea. Oil rose above $133 on Monday as long-term supply concerns lingered and fresh production problems
appeared in Nigeria and Norway. U.S. crude rose 95 cents to $133.14 a barrel by 11:28 a.m. EDT. London Brent
crude rose $1.47 to $133.04. Oil prices have risen nearly 40 percent this year, topping $135 for the first time
last week.
Oil Falls More
Than $3 as Record Prices Curb U.S. Fuel Demand. Crude oil fell more than $3 a barrel [5/27/2008]
in New York, the biggest decline since April, on signs that U.S. fuel consumption is dropping because of a
slowing economy and record energy prices.
Oil's
biggest day yet drags down stocks. Oil prices made their biggest single-day leap ever Friday, dragging the
Dow Jones industrials down nearly 400 points and raising the once-unthinkable prospect of $150 oil and more record gas
prices by the Fourth of July.
Energy chief: Flat production
behind oil prices. Oil prices made their biggest single-day surge on Friday [6/6/2008], soaring $11
to $138.54 on the New York Mercantile Exchange, an 8 percent increase. That followed a $5.50 increase the day
before, taking oil futures more than 13 percent higher in just two days. While demand has increased as supply
has stalled, analysts have also cited the decline of the U.S. dollar, fears about the long-term supply of oil, and
aggressive speculation as factors in rising prices.
Oil climbs to new record above $142 a barrel.
Oil prices climbed to a record above $142 a barrel Friday [6/27/2008] as the U.S. dollar's protracted slump
and falling stock markets prompted investors to take refuge in oil. Prices were also lifted Thursday
after OPEC's president said crude prices could rise well above $150 a barrel this year and Libya
said it may cut oil production.
Oil near $143 on view dollar will keep
falling. Oil futures climbed to a new record near $143 a barrel Friday as the dollar weakened
against the euro, confirming expectations that the falling greenback, a major factor in crude's stratospheric
rise, will extend its decline and add to oil's appeal.
Iran talks, stronger dollar cause oil to
drop. Oil prices tumbled nearly $4 a barrel today, erasing many of last week's record gains in
a single session as concerns about potential supply disruptions eased. Light, sweet crude for August
delivery fell $3.92, or about 2.7 percent, to settle at $141.37 on the New York Mercantile Exchange.
Oil extends slide into 2nd day, losing over
$5. Oil tumbled more than $5 a barrel Tuesday [7/8/2008] in its second big drop this week,
hurling crude back to levels not seen since June 26 as traders wary about the health of the global economy
cashed in gains from oil's recent rally.
Oil sets new
trading record above $147 a barrel. It's only July, but it might be time to start loading up on blankets and
sweaters. Oil spiked to a new trading record as hostilities rise between the West and Iran — raising the
likelihood that this winter's heating bills will be the priciest yet.
Crude Oil Rises to Record on
Speculation Israel May Attack Iran. Crude oil rose more than $5 to a record on concerns that Israel may be
preparing to attack Iran, while a strike in Brazil and renewed militant activity in Nigeria threaten to cut supplies.
Oil Prices Plummet Over $6 Amid Economic Fears. Oil
prices fell harder than they have in 17 years on a dollar basis Tuesday, as fears that record fuel prices
are spreading broad economic pain led to the third big sell-off in just over a week. US light, sweet
crude plunged $6.44, or 4.4 percent, to settle at $138.74 in an extremely volatile session.
Oil Falls More Than $5 as
Natural Gas Tumbles, Economy Slows. Crude oil fell more than $5 a barrel, dropping below $130 for the first
time in six weeks, as natural gas futures tumbled and global economic growth slows. Natural gas dropped more than
7 percent after a government report showed that U.S. supplies rose a greater-than-forecast 104 billion cubic
feet last week.
The great oil
bubble has burst. The price of a barrel of crude has been falling: from a peak of $145 in
early July, it came down to $117 and was trading yesterday [8/7/2008] at $120. That's almost a
20 percent drop in little more than three weeks.
Oil ends U.S. trading at a three-month low. Oil
prices finished at a new three-month low Monday [8/11/2008] after briefly dropping below $113 a barrel mark, as
the dollar extended its rebound and more signs emerged that China's energy demand could be leveling off.
Shock waves spread
as oil bubble bursts. The exposure of the oil price boom as a speculative bubble has been
the catalyst for a change in world financial flows, and the ripples are now spreading through currency,
commodity and financial markets. Oil hit its peak of $147 a barrel on July 11, paused and then
started to tumble on July 15, and there has been no sign yet that its fall has been arrested.
Oil Rises More Than
$6 on U.S.-Russia Tensions, Dollar Weakness. Crude oil jumped more than $5 as the dollar slumped
and the signing yesterday [8/20/2008] of a missile-shield agreement between the U.S. and Poland bolstered
concern that Russia may disrupt the flow of oil.
Oil drops below $110 as Gustav
fades. Oil fell below $110 a barrel on Tuesday [9/2/2008] for the first time since April as
traders bet the U.S. oil industry would recover quickly from Hurricane Gustav. Early indications that
oil installations suffered only minor damage from the storm returned the market's focus to bearish factors
including slowing global energy demand growth, rising inventories and a stronger U.S. dollar.
Oil hits 5-month low as
demand shrinks. Oil prices fell to their lowest level in five months on Friday [9/5/2008] as
investors worried that an economic slowdown could chip away at demand for energy.
Oil rises as Ike bears down on Texas coast.
Oil prices rose over $102 a barrel Friday [9/12/2008] as Hurricane Ike swept up from the Gulf of Mexico,
prompting companies along the Texas coast to shut down refining and drilling operations.
Oil Falls Below $97 on Little
Damage From Ike. Oil prices fell below $97 a barrel on Monday [9/15/2008] after Hurricane Ike
inflicted minimal damage to oil installations on the Texas coast. Light, sweet crude for October
delivery declined $4.39 to $96.79 a barrel in electronic trading on the New York Mercantile Exchange by
noon in Europe.
Oil sinks more than $10. Oil prices tumbled
more than $10 a barrel Monday [9/29/2008] — the second biggest drop in dollar terms ever on an active
contract — as the government's proposed $700 billion bailout was defeated by the House, adding to
concerns about the spread of economic weakness worldwide.
Oil
drops 6 percent to below $88 on demand concerns. Oil dropped more than 6 percent to below $88
a barrel on Monday [10/6/2008] as a global market rout churned concerns that faltering fuel demand could slow
further. U.S. stocks tumbled 6 percent to the lowest level in nearly five years as part of an
international sell-off on fears the global economy was heading into recession.
Crude Oil Drops
Below $80 as Equities Slump on Credit Freeze. Oil dropped below $80 a barrel in New York and
copper headed for its worst week in more than 20 years on concern the deepening financial crisis will
push the global economy into a recession, cutting demand for raw materials.
Oil falls below $79 on
profit-taking, demand drop. Oil prices fell below $79 a barrel in choppy trading Tuesday [10/14/2008]
as investors took profits from the previous day's rally and shifted their focus back to signs of dwindling
world energy demand. A falling U.S. stock market, a day after a record-breaking advance, also weighed
on crude prices as oil market traders continued to fixate on equities as a barometer for the overall
confidence in the shaky world economy.
Crude Oil Drops
Below $70 After U.S. Reports Inventory Gain. Crude oil fell below $70 a barrel to the lowest
since June 2007 and gasoline tumbled after a U.S. government report showed stockpiles increased more than
twice as much as forecast. Supplies rose 5.6 million barrels to 308.2 million barrels last
week, the Department of Energy said in a weekly report.
OPEC calls emergency meeting as oil
prices plummet. Oil prices plummeted Thursday [10/16/2008], falling below $70 a barrel for the
first time in 16 months, prompting the OPEC oil cartel to call for an emergency meeting next week.
The rapid decline in prices had alarmed both petroleum company executives and oil producers, who are becoming
increasingly nervous that oil's roller-coaster ride undermines the stability of energy markets.
Oil falls below $67 on
US recession fears. Oil prices tumbled below $67 a barrel to 16-month lows Wednesday [10/22/2008]
after the government reported big increases in U.S. fuel supplies — more evidence that the economic downturn
is drying up energy demand.
Oil below $64 as investors eye weak demand. Oil
prices fell to their lowest level in more than a year Monday [10/27/2008] before rebounding to just above $63 a
barrel as growing evidence of a global economic slowdown had investors betting on a further drop in energy demand.
Gas continues to fall as oil slips below $65. Oil
prices ended the week with a modest rally Friday but couldn't erase one ugly October: Crude capped its biggest
monthly drop since futures trading began 25 years ago, weighed down as a deflated U.S. economy crushes demand
for fuel. Oil's huge collapse — prices fell 32 percent for the month — has stunned
oil-producing countries while giving cash-strapped U.S. consumers a rare dose of relief.
Oil
prices swing wildly as Dow rally fails. Oil prices fluctuated throughout the day Monday
[11/10/2008], tracking closely with the path on Wall Street where an early rally failed to hold. Light,
sweet crude for December delivery rose $1.37 to settle at $62.41 a barrel on the New York Mercantile Exchange
Monday, but swung as low as $59.10 at one point.
Oil Falls
to 19-Month Low, Gasoline Tumbles, on Demand Outlook. Crude oil fell below $59 a barrel in
New York for the first time since March 2007, and gasoline tumbled, on speculation the International Energy
Agency will cut its 2009 oil-demand forecast because of slowing economic growth.
Flashback to 2005: $55 oil
won't last. When I put a $55 barrel of oil on the table and look at it
from all angles, there's no way the current price can be justified. As a free-market
disciple, I am compelled to accept the market's verdict: $55 a barrel. But that
doesn't mean it's going to last.
Predictions for future oil price trends
Analyst predicts $200 oil could happen this year.
A Goldman Sachs analyst predicts that oil prices could reach $150 to $200 a barrel over the next 6 months to two years,
but said that how far prices could climb still "remains a major uncertainty." "We believe the current energy crisis may
be coming to a head, as the lack of adequate supply growth is becoming apparent," analyst Arjun N. Murti wrote in a
client note.
Will Oil Really Hit $200 a
Barrel? Once again, many market participants appear to believe that oil prices can only go up. It seems
that the painful lessons of the 2001 dot-com bust have been forgotten, as have the lessons of the much more recent U.S.
housing crash. In their state of forgetfulness, many pension funds and insurance companies have built up very large
open positions in the oil futures market. These positions are now estimated to total over $200 billion, roughly
the equivalent of a full year of Chinese oil demand.
An
ominous warning that the rapid rise in oil prices has only just begun. The chief executive of the
world's largest energy company has issued the most dire warning yet about the soaring the price of oil,
predicting that it will hit $250 per barrel "in the foreseeable future". The forecast from Alexey Miller,
the head of the Kremlin-owned gas giant Gazprom, would herald the arrival of £2-per-litre petrol and send
shockwaves through the economy.
$225/barrel
oil predicted by 2012. Prepare for gasoline prices to hit $2.25 a litre by 2012 and for crude oil to soar to
$225 US a barrel as scant supply growth delivers us into the "age of scarcity," says CIBC World Markets chief economist
Jeff Rubin. "Our latest review of probable supply suggests oil production will hardly grow at all, with average daily
production between now and 2012 rising by barely more than a million barrels per day. … He said there has been no
growth in oil supply over the past two and half years….
Analysts
warn of oil price bubble. The flood of speculative investment into oil markets is inflating a
price bubble that could pop and send crude prices sharply lower if U.S. petroleum demand continues to slump,
analysts warned yesterday. Crude prices continued their remarkable rally yesterday, rising 95 cents
to close at another record high of $105.47 on the New York Mercantile Exchange.
The Editor says...
Having lived in west Texas for many years, I can tell you that when a crude oil bubble bursts,
things can get really messy.
A Primer on Oil Prices. "The tripling of
oil prices since the summer of 2003 has unleashed forces that within the next two or three years will bring oil prices
tumbling back down to below $50 a barrel." So said John Cassidy, writing about "The Coming Oil Crash" in the January
issue of Conde Nast Portfolio. Yes, the price of oil will come down, though no one knows exactly when.
Cheap Oil to Last,
"Doomsday" Fears Overblown, Author Says. Is the era of cheap oil really at an end? Or
could a glut send prices into a freefall? Should Western countries fear energy blackmail from oil-rich
powers? There's no crystal ball to predict oil's future, but Leonardo Maugeri believes that much can be
learned by looking at the industry's past.
Oil price 'abnormal' but
$US78 achievable. Crude oil prices above $US120 a barrel are "abnormal" and could fall to about
$US78 under the right circumstances, OPEC president Chakib Khelil said in Jakarta yesterday. "If the
dollar continues to strengthen and the political situation (regarding Iran) improves, then the long-term
prices will be about $US78," Mr Khelil said, adding the market was well supplied with oil.
Flashback to 2006... Oil
prices appear headed for $70. While last summer's price spike triggered outrage in the US
Congress and hurt sport utility vehicle sales, it caused only a hiccup in motor-fuel consumption. And
for now, with demand back on the rise, the economy seems capable of absorbing uncomfortably high prices.
Talk
of $200 oil by year's end quietly fades. Talk of $200-per-barrel oil prices
by the end of the year has quietly faded away and been replaced by forecasts for $100. It
would be easy to say that crude oil has failed to meet market expectations, and a bear market may
be in place. But the harder part is to figure out how long and to what point oil prices
will fall.
What to Make of
Oil's Weakness. Given the strong price correlations between the two commodities, many economic
commentators wrote of the gold/oil relationship in terms of a 15:1 ounce/barrel ratio. As the late Warren
Brookes wrote in his 1982 book, The Economy In Mind, "In 1970 an ounce of gold ($35) would buy 15 barrels
OPEC oil ($2.30/bbl). In May 1981 an ounce of gold ($480) still bought 15 barrels of Saudi oil ($32/bbl).
Oil May Fall to $50 in Global
Recession, Merrill Says. Crude-oil prices may fall as low as $50 a barrel next year, about half current
levels, in the "unlikely" event of a global recession, weighing on shares of petroleum producers, Merrill Lynch & Co.
said. ... Merrill cut its 2009 average price estimate for West Texas Intermediate, the U.S. benchmark oil grade, by
16 percent to $90, citing falling demand and the start of new fields in [OPEC] Countries.
