"Oil may plunge below $25 in 2009"

[blzr]

Who thinks T-Boone Pickens is just a snake-oil salesman? I do. Capitalizing on the fears of the weakminded.

 

[waka]

Oil should cost what its natural value.

"Natural value"?? I'll grab some popcorn while you explain that one.

And since oil is so plentiful. So common. So unrestricted is should cost whatever it costs to get it out of the ground and transport it.

Peak oil was a Shell Oil scam in the 1950's developed to create future fears about a false scarcity which does not exist.

True, in the past, there have been scams regarding how soon the world would effectively run out of oil. However, if you think the supply is endless, you're deluding yourself.

 

[huncowboy]

After the screwing we took this past summer >> Fuel can never be cheap enough for me. You can't tell me supply and demand had anything to do with fuel costs. We are not driving 60 percent less than we were 3 months ago.

Indeed true. I have been saying this on a different website since April when everyone was predicting $250 for 2009.

I was referring to this chart back then (and to some discussion with a former regional friend of mine who used to be a commodities trader in Chicago). This is the inflation adjusted oil price chart. Perhaps it was already discussed here on flightinfo. Look here:

http://www.inflationdata.com/inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart.htm

Looking at the chart, you can easily see the spike that cannot be explained by regular and actual user demand. And the chart is not even up to date it only reflects some $110ish. Add that another 20% to it to get $147. You ever see a spike like this, you know a correction is coming. House market, oil prices, you name it.

I will not forget when Bernanke was on TV around the peak, and he said oil prices were driven purely by principles (supply/demand) and not speculation (non user investment) because inventories were unchanged. Well... he must have missed this chart, and the fact that inventories are not necessarily the driving force in determining oil prices. Surely a factor. But there is no real good way of measuring world oil inventories either. Also when you talk about futures (and I have no experience in those contracts so someone correct me please) I doubt each and every contract has actual inventory behind it. Either way, time has proven him wrong. Not to say that the guy is not a genius. He is. But he can be wrong too.

So in a nutshell, artificial demand was created by non users (like hedge funds) investing heavily into commodity futures, driving the price way up. Part of the reason for the money flowing into commodities was due to the stock market peaking in 07 and starting a steady decline. Stocks did not produce the returns oil has been producing for a while. The sudden oil price spike seemed to promise quick gains. Money left stocks for commodities. Especially I bet average joe investors did this a lot. You know... If a baby can do it, you can too... I love etrade's commercial. If a baby can lose a boat load of money in a few weeks, you can too. With all the markets open to this new breed of average people who now can invest their $50k or even $5k and trade as they see fit, without formal training, or any trading experience, at the comfort of their home computer. They are exactly how etrade shows them. Baby traders. I am sure some of them threw up too a lot lately. My guess is that they account for at least some of the volatility that we see lately. When you play with you own hard earned 50k-100k, you get emotional.

But back to the original topic... IMHO at the moment the opposite is happening. Oil futures are dumped onto the market and hedge funds are folding. So I think with $40 we are way oversold. Next thing that will happen is some funds, that relied heavily on commodities will belly up or come close to it. I hope your retirement fund was not relying too much on commodity futures. Ouch...

The good news is that if we are lucky, this event has triggered a real push for alternative energies. I may be a bit too optimistic on this one but we can hope. If so, the damage was worth it. As the result oil demand may be better controlled before the next spike. For now I would guess flat oil prices for 2009, but higher than $40. Then a steady but not steep increase for 2010 and on, starting when the world economy enters its normal phase, which is growth.

Feel free to criticize...

 

[Mach 80]

Where are the guys who were gleefully screaming about SWA's fuel hedges running out? SWA could only hope so, at least in the short term.

 

[deepwater]

When gas drops to $1 a gallon I would love to have a big ass tank to store it in so that when the price gets jacked back up I have cheap gas to use or sell it for a huge profit. Oh well.

CRX got something better for you so you don't have to rent a backhoe or fill out EPA paperwork.Try buying DIG Proshares leveraged X2 energy ETF or better yet try Direxion X3 energy ETF. Probably a good idea to wait a little while as oil continues to slide. The Direxion funds were only created last month so trying to trade them might be a little difficult. When and if oil hits 30-35 a barrel then Direxion ERX might be good buy and hold for a while.
Just be ready for a roller coaster as the volatility is
crazy with this ETF. Also do your own DD as taking
investment recommendations from a pilot in FI could
further reduce your retirement account. I covered my short on oil at 70$ a barrel thinking I was brilliant.

 

[jhill]

One can only hope that the new administration and congress starts looking out for the interests of Americans first. Hopefully, we as a country can stop selling our national souls to foreigners in return for shiny trinkets. Lets start buying AMERICAN again and keeping livable wage jobs in this country.

This recession and the lower oil prices gives us that chance to change course.

Also, hopefully, these traitors masked as CEOs that pilfered off billions of dollars into their personal off-shore bank accounts while selling out their fellow Americans have been exposed for the scum they really are.

CEOs or Congress? Oh wait they do it togther don't they. All the while we listen intently to their stated "good intentions" and blindly follow the party that we beleive serves our best interest. The only difference between the two is the rhetoric. It makes no difference which "party" is in power. They are one in the same. Go ahead and wait for them to save you. It ain't gonna happen. You will stay in your place and keep waiting on handouts.

 

[Dizel8]

Like someone else said, let's hope this short price drop doesn't delude people into believing prices will not rise. OPEC wants, and more importantly, to keep their economies alive, needs $70+, they have said as much and they will probably keep reducing supply untill they get it.

Second, no matter what the price is, remember who we are sending money to, Chavez in Venezuela, Ahmadijad in Iran, the Saudi royals, Putin in Russia. None of those has US best interest at heart and they never will.

The US needs to reduce consumption, doing so, will really put the screws to those wishing us ill, as a matter of fact, it is possible to split OPEC, one of the best hings that could happen. If we reduce useage, OPEC will respond by decreasing supply, but they can only decrease output so much, they have to keep selling, well, if there is a glut of oil, each country will probably start cheating, making sure their oil is the oil being bought. Much like if there was an oversupply of flat screens and both Best Buy and Circut City needed to sell them.

We have been here before, back in the 70's we had the embargo, we didn't learn then, in the 90's the US was, AFAIK, the only country whose gas mileage decreased, since we were buying SUV's like crazy.

We have a great opportunity here, no, we probably will never be energy independent, but we can reduce consumption and put the squeeze on producers.

Every single vehicle on the road should be capable of flexfuel, tax incentives on hybrids, higher taxbreaks if they are made by US manufacturers (not to worry, the japanese protects their auto manufacturers, via high duties on US cars). Bring the plug in hybrid to the market, it already exist. Drop import duties on Ethanol, currently around $25 of barrel equivalent, plenty of Ethanol manufacturers around the world, plenty of countries that would make it if there was a demand in the US, take a country like Dominican Replubic, who could grow sugar cane like crazy.

Listen to this lady, ignore the eyebrows, but she is a brilliant thinker and what she says makes a lot of sense:

http://www.youtube.com/watch?v=7MVwL2PcCG8&feature=PlayList&p=0EDD95381A93824A&index=0

 

[Smarta$$]

Is Obama till going to try and pass the "Windfall Tax" that is supposedly a big part of his economic plan?

Jetflier would now have to agree that JUST THE MENTION of drilling for our own oil scared the market enough to drop the price of iol by $110 in less than 6 months! The natural resources of this country are huge and largely untapped. The SHEEP in society will believe the chicken-little's of the world, but those in power know differently and THEY control the markets!

I just hope we can tap just a little of the oil off the west coast. It would prove to be very stabelizing to the world oil market..IMHO>

What an Idiot. Your analysis could not be more wrong.

 

[Daytonaflyer]

What an Idiot. Your analysis could not be more wrong.

I agree. blzr, how can you be so uninformed? Obama has already decided to delay any windfall taxes.

T. Boone Pickens may be an oil magnate, but he's got the right idea. Just as much profit can be made from alternative, clean sources of energy. More jobs will be created too.

 

[N1atEcon]

Hey mach 80. Just FYI SWA is hedged at 70 % at 51.00 a barrel in HEATING OIL. You cant hedge Jet fuel. So, as of friday heating oil futures were 142.65 a gallon on the NYMEX. 142.65 * 42 (gallons in a barrel) = $59.91.