A COUPLE OF MONTHS AGO, WE WERE DISCUSSING THE COST OF GAS. I PREDICTED THAT IF OFF SHOR DRILLING AND OTHER DOMESTIC SOURCES WERE RELEASED IT WOULD DROP LIKE A STONE.

I predicted $1.99 per gallon gas by the end of the year. I was wrong.

The Presidential ban was released in August.
The Congressional Ban expired in October 1st.

Price of a gallon of unleaded regular in Kansas City MO is at $ 1.89 this morning.


Enjoy


roadster with a stick

 

Well, it's not the end of the year yet Franc. There are several factors that are lowering the cost of oil/gas. As you mentioned, off shore drilling was a big contributor. Also, demand is down. Summer driving season is over and in general, the country is experiancing moderate climate so were using less energy to heat/cool our homes/buildings.

Now OPEC is cutting production. And, I don't trust the dems to continue to allow offshore drilling. By December 31st energy demand will be back up some for winter heating. So, I suspect your $1.99 prediction could be right on.

 

Franc,

I don't think that the opening of U.S. sources to exploration and eventual drilling was responsible for much of the fall in oil/gas prices. Psychologically, it may place some downward pressure on prices in the near term, but it will be a decade before that oil is harvested where it can meaningfully impact supply. As Inferno stated, demand is a big factor. Demand for gasoline is down 6% from the same time last year. The reduction in demand is not linear in relation to the price. A 6% reduction in demand causes a price drop of way more than 6%. That is because with the reduction in demand there is no longer as much competition for the current supply, even with the OPEC cut. There's no longer as much need to secure future oil when it is more plentiful so the speculative bids decrease. Since the financial crisis and recession/depression will likely affect many parts of the global economy, there isn't nearly the demand for oil as if only the US was experiencing economic troubles. Another huge contribution to the fall in gas/oil prices is the flight to dollar denominated assets, mainly bonds. The dollar has strengthened by approximately 25% vs. most other currencies (except the yen) over the past few months. Oil is priced in dollars, so even though oil has fallen in price by 50%, the fall isn't as great when measured in the currencies of the oil exporters. Once the dollar resumes its fall as the inflationary actions of our Fed take hold, foreigners will once again demand more dollars for their oil.

 

A lot of people beliveve as you have explained here. That would include many in Congress. The price of fuel at the pump is not a simple equation. But the law of supply and demand has not worked in the oil industry for some time.
There was a glut of oil on the world market as early as January of this year. When President Bush spoke with the Saudis this summer, they told him there was no point in increasing production as the oil supply line was full.
Yet, the price of crude did not drop. the price of refined products did not drop. Wildcat operations all over the world had no trouble finding financing
as the US clearly would not soil it's pristine land with the goo it so desparately needed and was willing to pay 5 thats FIVE times it's normal market value to get it.

Refiners are actually happy with lower demand during the most recent high crude prices as they mostly operated at a loss in August and September.

As soon as Bush released the ban, oil dropped by $30 a barrel inside of two weeks. It continued it's decline untill October 1st when the Congressionsal ban, despite threats from Pelosi and Reid of a NEW comprehensive energy policy. Once the market realized that Pelosi's threat was, at least temporarily, an empty threat, crusde prices crashed. Despite the threat of OPEC to cut production, crude pricing has been slow to stop it's downward trend.

My sources, in the business, tell me we could have new oil out of the Gulf of Mexico next summer but likely 2010. The huge Bakken reserve in S Dakota is finally free of government ban and the one well I am involved in has proven a producer. There will be at least 60 more in the near future if money gets easier to borrow.
As for congress, recent polls show that only 18% of Americans actually believe global warming is man made.

Say what you want, make it as complicated as you care to do, but mark this, if we can compete with foriegn oil on any increased level of domestic production, we can stop financing the hotels in Dubi, the United Arab Emarites, and Quatar. The Saudis will have to go to Switzerland to ski.

You can't win at poker with two dueces. We now have an Ace or two.



roadster with a stick