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Pump prices are headed toward five-year lows, the Energy Department said Monday (Dec. 8). And, according to a report in the Los Angeles Times, despite a bump in crude prices some analysts say the slide might not end until oil hits $25 a barrel and gasoline drops to $1 a gallon or below.
Crude oil for January delivery climbed $2.90 to $43.71 a barrel Monday on the New York Mercantile Exchange. But some experts didn’t see much momentum behind the increase because of expectations of a bleak jobs picture for January and weaker demand for oil.
“The world has changed. I don’t see any reason why $1 gasoline isn’t possible, and $25-a-barrel oil is not out of the question,” said Phil Flynn, vice president and senior market analyst for the Alaron Trading Corp. in Chicago. “I don’t think the downside is over. There is a lot of surplus oil out there.”
But Fadel Gheit, senior energy analyst for Oppenheimer and Co., is one of the analysts saying that oil won’t stay down, even if the historic price drop isn’t quite over yet.
“Some of the same clowns who were predicting $200-a-barrel oil a few months ago are in the crowd predicting $25 a barrel. But just as we believed that oil above $100 was not sustainable by market fundamentals, oil below $30 isn’t sustainable either,” Gheit said.
“Even in the midst of this global recession, the world is still using 80 million barrels of oil a day. If production is cut back sharply and the oil companies keep reining in capital spending, it will come back to haunt us,” Gheit added, saying that the global economy would eventually improve and place greater demands on supplies.
Oil’s relative weakness – down from highs above $145 a barrel in July – continued to drive the price of a gallon of gasoline down at an astounding rate.
Nationally, the average price of self-serve regular gasoline fell 11.2 cents to $1.699 a gallon. That was $1.30 below the year-earlier price and was the lowest average since the $1.688 the Energy Department recorded on Feb. 23, 2004.
Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey, wasn’t among those who saw gasoline dropping below $1 a gallon, but he said more price relief was on the way. Kloza predicted that the U.S. average would drop to about $1.50 a gallon.