October 11, 2006

WHEN IT STARTS FALLING ON "BAD NEWS," GET OUT OF THE WAY:

How Low Can Gas Prices Go?: Experts Predict Lower Gas Prices May Fall Even More (ABC News, Oct. 11, 2006)

New figures show the average price of a gallon of gas went down by a nickel last week, the ninth straight week of gas price declines.

In the last two months, the national average has plunged more than 75 cents, to $2.26 a gallon.

Across the country, oil and gas experts say Americans may see prices continue to drop for weeks, if not months. [...]

Can prices go lower? Yes -- experts are predicting them to drop 30 cents to 60 cents more.


Oil prices down despite OPEC cut (Agence France-Presse, 10/12/06)
WORLD oil prices fell sharply overnight, with New York crude hitting its lowest level of the year, as traders brushed off an OPEC announcement that cartel members would slash output next month.

New York's main contract, light sweet crude for delivery in November, lost 93 cents to close at $US57.59 a barrel. It had dropped as low as $US57.48, its worst point since December 27

Posted by Orrin Judd at October 11, 2006 10:07 PM
Comments

Hot damn! Just a few weeks ago I grabbed up a beautiful, really minty, 1996 V8 SUV for a song while mid-grade was about $3.60. I had known all along from reading BrothersJudd that gas was going to crash.

Posted by: Lou Gots at October 11, 2006 10:59 PM

And I didn't sell my 1991 Grand Wagoneer for exactly the same reason! Well, not really. I just love that car.

Posted by: HT at October 11, 2006 11:13 PM

The oilmen out here in West Texas are saying even at $50, they'd still be making over a 100 percent profit on every barrel pumped, so with those kinds of numbers, you can expect supply to keep rising for a while, which will keep prices headed downward.

Posted by: John at October 12, 2006 12:02 AM

It's "worst" point?

You just gotta love the French.

Posted by: Peter B at October 12, 2006 7:54 AM

John,

I would have to think by now that the cost of drilling West TX Intermediate Crude has decreased, and will continue to do so as Valero and other refiners start using the "sour" stuff. At what point does drilling become a money-losing proposition?

Posted by: Brad S at October 12, 2006 8:28 AM

Brad --

Depends on what they're drilling through -- the boomlet right now in West and North Texas is into shale formations that tend to fracture, clogging or re-sealing the holes. New processes for dealing with that problem and getting the oil out of the porous shale are being developed, and one Oklahoma company recently signed a deal for $180 million to drill into the shale for natural gas under the Dallas-Fort Worth International Airport.

Cost-effectiveness on those types of projects are no doubt higher than the normal oil/gas drilling efforts. For oil, the break-even point right now through less difficult formations appears to be in the $22 range, so any price-per-barrel over that is profit.

Posted by: John at October 12, 2006 9:49 AM
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