Sunday, October 15, 2006

Oil price as low as $35

In Alaska they enjoy the windfall of oil revenues - so much that individuals pay no taxes; they receive a check from the state. So they watch the price of oil. And they don't like what they see now. Alaska Journal:
The current slide in crude oil prices could accelerate into a plunge to as low at $35 per barrel next year, ConocoPhillips' chief economist, Marianne Kau, told a group of economists in Anchorage Oct. 11. That's a sobering prospect for the next governor of the state - who will take office in early December - because a dip in oil prices, combined with declining North Slope production, could throw the state budget into a deficit again after two years of surpluses. .... Prices won't dive to $9 per barrel that Alaska saw in 1999, but they could go to $35 per barrel, Kau said. "Given the current slowdown in the economy and high inventories in the market, prices should logically be at $35 per barrel now," she said.
There is something new here ...
What has helped drive prices up is a huge flow of money coming into oil markets from commodity investment funds. These funds are likely to exit the market as prices slide, quickening the downturn, Kau said. "These new financial players are creating a lot of short-term price volatility.
Steve Forbes predicted this last year, but a bit quicker, like by now.

No comments: