September 13, 2006


Oil, gas prices take a dive (Patrice Hill, September 13, 2006, THE WASHINGTON TIMES)

Oil prices plunged below $64 a barrel yesterday and settled 19 percent below this summer's record highs, bringing a major dose of inflation relief to hard-pressed consumers and the economy. [...]

Some analysts say a sea change is occurring in the oil market, and it will not revisit soon the record high of $78.40 set in July by premium crude in New York. Premium crude prices settled at $63.76 a barrel in New York trading yesterday, the lowest since March.

"We're in the midst of a tectonic change," said Peter Beutel, president of Cameron Hanover Inc., an energy consultant. "The rally that's lasted almost five years may be over. We keep seeing lower demand estimates which show the impact of very high prices."

Yesterday, the International Energy Agency trimmed its forecast for world oil demand this year by 100,000 barrels a day, and by 160,000 barrels next year, citing slackening demand in the United States and elsewhere.

At the same time, Saudi Arabia's oil minister, Ali al-Naimi, told a conference in Vienna that oil producers plan to invest nearly $100 billion in new oil and gas projects in the next five years to meet rising demand -- raising the prospect of a long-sought easing in the tight supplies that have fueled record oil prices.

Feeding the optimism on Monday, Iraq's oil minister said the war-ridden country hopes to double its oil production to more than 4 million barrels a day in the next five years -- a development that could cause further dramatic drops in oil prices. Though it has the world's second-largest conventional oil reserves, after Saudi Arabia, much of Iraq's production has been idled for years because of a lack of investment and maintenance as well as sabotage by insurgents.

It's an ideal time to impose new gas taxes so as to keep damping down demand.

Posted by Orrin Judd at September 13, 2006 9:18 AM

"ideal time to impose new gas taxes"

Which would amount to a subsidy to the economies of China, Europe, while penalizing the US economy. Not the highest priority in my recommended policy changes.

Posted by: h-man at September 13, 2006 10:39 AM

Taxing consumption and encouraging saving would devastate the Chinese economy.

Posted by: oj at September 13, 2006 10:45 AM

And the U.S. economy as well.

Posted by: HT at September 13, 2006 10:49 AM

Banner story when logging into AOL last night:

How low will prices drop (picture of gas pumps)

Quite a change from a few weeks ago when they were predicting $100/barrell $4/gallon.

Posted by: AWW at September 13, 2006 10:51 AM

We just ran that experiment and higher gas prices had no effect on the economy--though hysterical Fed hikes eventually did. Meanwhile, replacing income taxes with a consumption tax would greatly benefit the economy.

Posted by: oj at September 13, 2006 10:54 AM

Oh, ok lower income taxes.

By itself raising the retail price arbitrarily in the US, will lower comsumption with the comensurate lowering of world-wide prices and to an energy importer such as China it will be a benefit.

Posted by: h-man at September 13, 2006 11:02 AM

Increasing Chinese dependence on imported oil and decreasing ours is all to the good. Meanwhile, they're already entirely dependent on being able to buy our debt. Lowering that debt and buying more of it ourselves is bad for them.

Posted by: oj at September 13, 2006 11:18 AM

I like the idea of sliding-scale Import duties on foreign oil, tied to a fixed price of $75/bbl better. That would force all oil producers to show their cards when it comes to the actual cost/bbl of oil drilling.

Posted by: Brad S at September 13, 2006 1:40 PM

This increase in oil price was the good way to go because the money went to the producers from the consumers. The producers could then use the money to increase production everywhere, even outside OPEC. High Taxes screw up that dynamic.

Posted by: jorz at September 14, 2006 4:11 AM

It went to speculators who cashed it in. Taxes will let us all cash in.

Posted by: oj at September 14, 2006 8:25 AM