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With experts predicting a global economic slowdown, oil prices could fall to $60 a barrel, or lower - with gas prices soon to follow.
By Steve Hargreaves, CNNMoney.com staff writer
October 10, 2008: 1:46 PM ET
NEW YORK (CNNMoney.com) -- As the world loses confidence in the foundations of its economic system, the silver lining may be that oil prices are about to get a whole lot cheaper.
In a new report Friday, Deutsche Bank uses a number of interesting yard sticks to suggest crude is currently way too expensive and may fall to the $60 a barrel range as the economy worsens.
And the bank does expect the economy to worsen, painting a bleak picture - caused be the current financial turmoil - but stopping just short of predicting a multi-year recession.
The bank says it expects GDP growth to slow by 1.5% over the next few years - and hints that things could get even worse.
"Indeed if one examines the banking sector crises in Japan and Sweden, economic output declined for at least two years following the crisis," Adam Sieminski, the bank's chief energy economist, wrote in a research note. If the global economy slows to less than 2% growth a year, "oil prices could spiral down, much like they escalated in 2007."
Other analysts see oil prices going through the floor.
"As night follows day, low oil prices have always followed high prices, and the decline has always been swifter than the advance," said Peter Beutel, an oil analyst at Cameron Hanover.
Beutel sees a 2009 low of around $50 or $60 a barrel, then even lower prices in 2010.
"I'm not going to rule out some extraordinarily low numbers, even $20 a barrel," he said, acknowledging that five months ago many respectable analysts though we'd never go below $100. "Whatever the market does, it's going to make us all look like fools." .......
The price fall has caused some OPEC members to call for a cut in production levels, and the cartel has agreed to hold an emergency meeting in Vienna on November 18 to discuss the impact of the global financial crisis on the oil market. Oil drops 10 percent on demand, risk concerns | Reuters (http://www.reuters.com/article/businessNews/idUSTRE4995N820081010?rpc=77&pageNumber=2&virtualB randChannel=0 - broken link)
They're not going to just sit by and let it drop much further.
Yes, it's definitely time to back up the truck for some more shares of "evil big oil".
Agree, although there's probably a big window to do it. I'll give lower oil prices (not late 1990s low) another 2-3 years before they shoot through the roof. At any rate, I'd start buying into oil and services very soon.
I am all for low oil prices, but I hope they don't fall much below $50/bbl, because it will have the same effect it did in the '80s - destroying the feasibility of alternative energies and research.
It doesn;t change the fact that oil is scarer;but just like in the past we will hide our heads in the sand and it will rise agian.When you ignore a problem it is still there. We need a i9nclusive energy plan one that for the next decdes secures oil by drilling and alternatives for the future. Otherwsie the co0ntinuing shift of payment to the middle east will continue.The democratic congress hasn't a clue; their so in bed with the environmentalist.
I am for the Pickens plan. I don't know why neither candidate is backing it. Clean Natural Gas is a realistic alternative for the present day and its currently abundant. It is an excellent bridge between oil and whatever renewable eventually wins out.
Once inflation from the recent new money kicks in, oil is going back up. Expect another series of price hikes by next spring.
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