Oil May Fall Below $25 Next Year, Merrill Lynch Says

[NoShangriLa]

Oil May Fall Below $25 Next Year, Merrill Lynch Says

I hope that it doesn't happens because at $40s a barrel is hurting the global economy, and if it get any lower it will greatly affect my local economy more than it already is.


On the side note, Wall Street is suggesting that the recession mightly recover sometime mid 2009.

How long will the recession last?


<-- Pipe trade energy worker...current crisis is affecting employment.

 

[cubby1223]

Crude oil is already cheaper than bottled water, can't wait for it to fall even further. 😉 Couple more months I might be bathing in this stuff! 😀

 

[NoShangriLa]

Originally posted by: cubby1223
Crude oil is already cheaper than bottled water, can't wait for it to fall even further. 😉 Couple more months I might be bathing in this stuff! 😀

I'm glad that you are enjoying it, and I have heard that crude oil is very good for your complexion.

However, I don't think you will be bathing oil for long if price drop an additional $10 a barrel. Low $30s per barrel will drive many producers out of business because it become uneconomic to get the oil out of the ground.

 

[bctbct]

I have trouble with the world economy claim. It may hurt the economies of oil producing nations, but isnt it helping the ones that that dont?

I know its helping my company with lower fuel bills. Probably enough we could hire two people with the fuel savings.

 

[charrison]

Originally posted by: bctbct
I have trouble with the world economy claim. It may hurt the economies of oil producing nations, but isnt it helping the ones that that dont?

Article out today said US oil consumption is down 1.5MBD, which is about a 10% drop. If the rest of the world economy is down 10%, we are looking at work demand drop of 8.5MBD. IF that is the case, oil probably still has room to fall....

 

[SP33Demon]

Good, it's about time the fcking crooks gave us a retroactive refund. /thumbsup

 

[CADsortaGUY]

Bring it on.... 😉

 

[NoShangriLa]

The implication could mean that American may have to rely more on foreign countries for its energy in the near future, because lower price could spell the death of smaller American producers.

Start learning to bend over for OPEC more now than ever 😉

US Stripper Wells More Important than OPEC?

Oil's Slide Set to Leave Dark Trail

 

[Drift3r]

/Puts on tinfoil hat

Remember the talk about investigating and taxing oil revenues? The oil bubble bursted because it was being artificially inflated by speculators in the market right? Is there a possibility that the price of oil is being overly artificially under-valued to ride out an Obama presidency? Of course weaken demand because of a stagnate world economy makes deflating the price of oil easier since demand has dropped drastically me thinks. Me suspects that once demand rises and a more oil friendly administration pops back into the White House we will see a very robust rise in the price of oil. The drop in oil also has a nice edge in helping to deflate if not out right kill calls for alternative energy solutions that would break out oil addiction.

/Takes off tinfoil hat.

 

[Special K]

I guess OPEC's mandated production cuts aren't having much effect. Either that or the member nations are cheating and overproducing oil anyway.

 

[EagleKeeper]

There is a price point where it is not cost effective to pull the oil out of the ground.

The tar sands in Alberta already are shutting down.
Shale oil never really caught on.

The oil producers may cap the wells instead of pumping at a negative cost.

There is a fixed cost per barrel to get the oil out of the ground and to the refineries.

 

[miketheidiot]

Originally posted by: charrison

Originally posted by: bctbct
I have trouble with the world economy claim. It may hurt the economies of oil producing nations, but isnt it helping the ones that that dont?

Article out today said US oil consumption is down 1.5MBD, which is about a 10% drop. If the rest of the world economy is down 10%, we are looking at work demand drop of 8.5MBD. IF that is the case, oil probably still has room to fall....

that doesn't make sense, since i don't think global production has dropped substantially, which would indicate enormous buildups of oil reserves.

$25 oil wouldn't shock me though; however thats better than my wildest expectations, and far outside of even the lowest i would have even publicly speculated it would go, say 6 months ago.

 

[frostedflakes]

I can't imagine $25, but who knows -- I never would've guessed it'd go below $60.

 

[OCGuy]

Just what DMAC predicted.

 

[sandorski]

Originally posted by: Common Courtesy
There is a price point where it is not cost effective to pull the oil out of the ground.

The tar sands in Alberta already are shutting down.
Shale oil never really caught on.

The oil producers may cap the wells instead of pumping at a negative cost.

There is a fixed cost per barrel to get the oil out of the ground and to the refineries.

Existing Tar Sands Production won't shutdown, but Projects currently being Built are shutting down.

 

[Thump553]

Originally posted by: charrison

Originally posted by: bctbct
I have trouble with the world economy claim. It may hurt the economies of oil producing nations, but isnt it helping the ones that that dont?

Article out today said US oil consumption is down 1.5MBD, which is about a 10% drop. If the rest of the world economy is down 10%, we are looking at work demand drop of 8.5MBD. IF that is the case, oil probably still has room to fall....

I'd like to see a link to that article. I can believe oil demand is off marginally, maybe even 2-3% but 10% is ridiculous. Outside of the effects of replacing one 20+ mpg car with a Prius, I doubt my family's oil consumption this year has changed at all. Living in New England we learned a long time ago to turn the thermostat down, insulate, etc.

I still strongly believe that the vast portion of oil price change is due to market manipulation by speculators. If you are savy you can make just as much with the prices going down as going up. It's Enron on a grander scale.

 

[boomerang]

Originally posted by: Common Courtesy
There is a price point where it is not cost effective to pull the oil out of the ground.

The tar sands in Alberta already are shutting down.
Shale oil never really caught on.

The oil producers may cap the wells instead of pumping at a negative cost.

There is a fixed cost per barrel to get the oil out of the ground and to the refineries.

I'm no business major, but I would think that if enough production shuts down, the prices will start to rise. Supply and demand and all that.
Right? Wrong?

 

[Dr. Zaus]

Originally posted by: boomerang

Originally posted by: Common Courtesy
There is a price point where it is not cost effective to pull the oil out of the ground.

The tar sands in Alberta already are shutting down.
Shale oil never really caught on.

The oil producers may cap the wells instead of pumping at a negative cost.

There is a fixed cost per barrel to get the oil out of the ground and to the refineries.

I'm no business major, but I would think that if enough production shuts down, the prices will start to rise. Supply and demand and all that.
Right? Wrong?

Kind of; given the elasticity of the price: collusion should be high and therefor the only reason for low oil prices now should be intentional placing the price lower than the most profitable market clearing equilibrium.

I would expect a wild ride when the economy turns around as oil spikes due to increased demand and a lot of no-exploration.

 

[charrison]

Originally posted by: Thump553

Originally posted by: charrison

Originally posted by: bctbct
I have trouble with the world economy claim. It may hurt the economies of oil producing nations, but isnt it helping the ones that that dont?

Article out today said US oil consumption is down 1.5MBD, which is about a 10% drop. If the rest of the world economy is down 10%, we are looking at work demand drop of 8.5MBD. IF that is the case, oil probably still has room to fall....

I'd like to see a link to that article. I can believe oil demand is off marginally, maybe even 2-3% but 10% is ridiculous. Outside of the effects of replacing one 20+ mpg car with a Prius, I doubt my family's oil consumption this year has changed at all. Living in New England we learned a long time ago to turn the thermostat down, insulate, etc.

I still strongly believe that the vast portion of oil price change is due to market manipulation by speculators. If you are savy you can make just as much with the prices going down as going up. It's Enron on a grander scale.

About 1/2 the oil the US uses is for industrial production. Have you you seen the falling production numbers? Also realize that the EU and Jaapan are in recession, China is still growing but slower. I dont think a 10% drop in consumption is impossible or unreasonable at this point.



Text

he four-week average of petroleum products supplied in the U.S. was 19.3 million barrels a day, down from 20.5 million barrels a day a year ago, the report showed.

This article shows a 1.2 MBD drop on a rolling 4 week average. This is a 6.2% drop. And 6% of of the worlds 85MDB capacity would be a drop of 5MBD. The article I read might has used a peak production number minus current number to get the 1.5MBD drop number.

 

[StageLeft]

Cheap oil will not hurt the global economy. That's ridiculous, like saying cheap metal will hurt it. Oil is energy and energy is overhead, like a company's HR department or utility bill. Obviously it will hurt entities that do well on high oil, but the rest of us like it low.

As so many of us have known this year, oil analysts have no clue what they are doing. It seemed incredible that goldman sach's hyper-inflated estimates held any water (or oil!) and it turns out to be true. This $25 is like predicting my lawn will get wet if I'm in a rain storm. Now, whether it really gets that low remains to be seen, but it's hardly much of a wild prediction, given that it would require only a $20 reduction.

As mentioned, there is a floor to the cost of oil; at $25/barrel only those who are pumping it out with cheap methods will bother, so there becomes resistance as prices drop and more expensive extraction methods are rolled back.

 

[SP33Demon]

Originally posted by: Drift3r
/Puts on tinfoil hat

Remember the talk about investigating and taxing oil revenues? The oil bubble bursted because it was being artificially inflated by speculators in the market right? Is there a possibility that the price of oil is being overly artificially under-valued to ride out an Obama presidency? Of course weaken demand because of a stagnate world economy makes deflating the price of oil easier since demand has dropped drastically me thinks. Me suspects that once demand rises and a more oil friendly administration pops back into the White House we will see a very robust rise in the price of oil. The drop in oil also has a nice edge in helping to deflate if not out right kill calls for alternative energy solutions that would break out oil addiction.

/Takes off tinfoil hat.

Even if oil producers/speculators think that lowering prices this much will make us forget that they just scammed us this spring/summer, they are sorely mistaken. People have already traded in their SUV/Trucks for economical cars and car pooler/mass transiters aren't going to stop because they're still enjoying the additional $ they're saving. In addition, cheap oil isn't going to stop the transition to the electric plugin cars, they put the nail in the coffin when a gallon hit $5. Too little, too late Big Oil.

 

[StageLeft]

Originally posted by: SP33Demon

Originally posted by: Drift3r
/Puts on tinfoil hat

Remember the talk about investigating and taxing oil revenues? The oil bubble bursted because it was being artificially inflated by speculators in the market right? Is there a possibility that the price of oil is being overly artificially under-valued to ride out an Obama presidency? Of course weaken demand because of a stagnate world economy makes deflating the price of oil easier since demand has dropped drastically me thinks. Me suspects that once demand rises and a more oil friendly administration pops back into the White House we will see a very robust rise in the price of oil. The drop in oil also has a nice edge in helping to deflate if not out right kill calls for alternative energy solutions that would break out oil addiction.

/Takes off tinfoil hat.

Even if oil producers/speculators think that lowering prices this much will make us forget that they just scammed us this spring/summer, they are sorely mistaken. People have already traded in their SUV/Trucks for economical cars and car pooler/mass transiters aren't going to stop because they're still enjoying the additional $ they're saving. In addition, cheap oil isn't going to stop the transition to the electric plugin cars, they put the nail in the coffin when a gallon hit $5. Too little, too late Big Oil.

Apparently demand has risen a bit, though. I know personally I am no longer considering the cost of gas when I drive. When it was $4 I truly was, and it was limiting me. Now that it's half the cost, frankly I don't really care; I'm driving when I want/where I want, so my personal use has gone up.

 

[Corbett]

Originally posted by: cubby1223
Crude oil is already cheaper than bottled water, can't wait for it to fall even further. 😉 Couple more months I might be bathing in this stuff! 😀

You bathe in bottled water?

 

[GoPackGo]

Originally posted by: Corbett

Originally posted by: cubby1223
Crude oil is already cheaper than bottled water, can't wait for it to fall even further. 😉 Couple more months I might be bathing in this stuff! 😀

You bathe in bottled water?

Doesn't everyone?

 

[imported_K3N]

Demand for dollars will go down as result of this leading to a huge economic collapse.