We are all familiar with the old phrase: “What Goes Up Will Come Down,” so has the Oil Bubble burst because of economic conditions? How long will the lower prices last?
It may be hard to believe, but just a few months ago on June 6, 2008, this was happening with oil prices. The economic collapse was predicted back in June of this year. Almost half the members of the OPEC oil cartel are considering an emergency meeting in Vienna next month as oil prices dropped to their lowest level in nearly a year. Oh my, how a few months and a world in economic chaos can change the dynamics in the oil marketplace.
OPEC members met last month to reduce the production of oil output to stop the sliding price of oil. Still, if the rest of the world can’t buy oil, will OPEC eventually have a real problem on their hands? OPEC nations are scrambling and are calling for an emergency meeting as the price of oil drops below $80 per barrel. I remember just a few months ago when an OPEC minister was telling America that “we had better get used to it” as the price of oil approached $145 per barrel. Wonder if he remembers his statement?
Iran, Libya, Nigeria, Iraq, Venezuela and Ecuador, whose economies tend to be most dependent on high oil prices and whose ministers are among the most hawkish of the 13-member group, have all lobbied for the cartel to drop output.
Oil prices fell below $88 a barrel Thursday in Asia on investor fears that crude demand will weaken as turmoil in the financial system pushes economies in the U.S. and Europe into recession.“Oil prices traded briefly in positive territory after news broke of the latest efforts to counter the turmoil in financial markets. However, prices weakened again later in the session after the latest US weekly inventories data showed a recovery in activity following recent interruptions from hurricanes, combined with further clear evidence of weak demand.”
(Source: Yahoo News)
Libyan national oil company chief Shukri Ghanem called on oil producing nations to cut output to “protect their interest (and) stop the loss of income.”
“However, OPEC’s aim is to create a balanced market, which neither harms the producers nor the importers,” Ghanem told The Associated Press.
OPEC controls 40 percent of the world’s oil supply, but many analysts doubt it will be able to slow oil’s descent just by tightening output. OPEC’s announcement that it would cut production by 520,000 barrels a day failed to halt oil’s drop.
Total US demand averaged 18.66m barrels a day, down 8.6 percent against the same period a year ago.
Gasoline Prices are Declining, but still high in some locations.
NEW YORK (AP) — Oil prices closed at their lowest level in a year Thursday, falling below $80 a barrel even after OPEC signaled it may try to slow crude’s downward spiral by cutting production.
At the pump, retail gas prices kept falling, with a gallon of regular shedding 4.4 cents overnight to a new national average of $3.403, according to auto club AAA, the Oil Price Information Service, and Wright Express.
So far, oil prices have fallen more than twice as much as gasoline prices, suggesting that even if crude oil prices level off, there’s room for additional savings at the gas pump. Oil prices have dropped, but our friendly oil companies seem in no hurry to lower the price of gasoline to equate to the lower price of oil.
There is some doubt whether OPEC can actually slow oil’s decline. The cartel’s decision last month to cut production by 520,000 barrels a day failed to halt the losses, which have accelerated in recent days.