$40'LL BE FINE:

Experts look for the floor on oil prices (KRISTEN HAYS, 9/22/06, Houston Chronicle)

An oil economist who accurately predicted two years ago that oil would reach $70 a barrel has reversed course, saying recent steep declines could foreshadow a sell-off to $20 or less.

"Nobody in the government sector who thinks about policy thinks it can happen. That's the greatest danger," said Philip Verleger, an independent economist who heads PK Verleger in Aspen, Colo. [...]

The overall consensus among analysts suggests that the factors behind the drop don't suggest a free-fall.

The Morgan Stanley report said the run-up to nearly $80 a barrel coincided with political tensions in Lebanon, Nigeria and Iran, as well as fears that hurricanes could once again batter the Gulf Coast oil business during the peak summer driving season.

But prices fell as those worries ebbed and the U.S. Energy Department said gasoline and heating oil stockpiles were up.

Another factor in the price slide has been commodity investors, skittish over the decline, who are pausing, taking profits or fleeing, Merrill Lynch & Co. analyst John Herrlin Jr. said in a report this week.

"In reality, many made investment suppositions predicated on scarcity or supply disruption that didn't occur. Now the markets have to adjust to 'the unwinding,' " he wrote.