By on September 3, 2008

“Oil at $80 a barrel?” asks BusinessWeek.com.  Surely that’s not possible. After all, the world’s running out of oil, isn’t it? China and India have pushed global demand to untenable levels. Wells in Russia, Mexico and Saudi Arabia are running dry. High fuel prices are here to stay! We must have alternative energy… Bring on the EVs stat… Need more hybrids… Must have wind energy now… Ahhhhh!!! Yet Joel Fingerman, a Chicago-based energy consultant, has the nerve to forecast that “This is start of a fall to $80 crude by the end of the year, maybe as early as September.” And Oppenheimer senior energy analyst Fadel Gheit explains, “Oil prices are dropping because they are inflated. You cannot sustain an artificial price forever.” Hrumph! So did ya trade in your favorite SUV for an itsy bitsy gas miser? That’s too bad. Stephen Schork, editor of a daily energy newsletter says, “A lot of the strength [in oil’s price] was hype and hot air.” Gee, where have I heard that before?

Get the latest TTAC e-Newsletter!

38 Comments on “Business Week: Oil Headed for $80 a Barrel?...”


  • avatar
    Axel

    Hi there! :-)

    I’m the guy who said back in July that we’d see a rapid plunge in crude and gasoline by the post-Labor-Day period. I’ve been a bit frustrated at the slowness of the drop (I wanted sub-$100 oil and $3 gas), but it’s getting there. Having the Atlantic churning out one storm after another isn’t helping, nor can it be helped. Neither can war in the Caucasus. I think we’d see prices a bit lower had it not been for these factors.

    That said, light-sweet is getting tantalizingly close to double-digits, and I do think we’ll see gasoline approach $3 as the driving season ends and demand continues to slide.

    Once again, there are three components to the price of crude:

    1. The supply/demand part
    2. The fear and uncertainty part
    3. The speculation premium

    I think right now #1 is between $60-70/bbl, #2 is $30/$40, and #3 has shrunk all the way to $5-15, where it had been as high as $50. The speculation game is over.

    What happens to fear and uncertainty is hard to predict, but I think there will be a lot of irrational joy around the world if Obama is elected in November, and we could see oil as low as $70 by January.

    The supply/demand situation is going to keep getting worse, but that’s a much longer term trend. If oil bottoms out at $70, that will probably be the last time… EVER… that we see crude that cheap. Maybe also the last time we see gasoline below $2.50 in the USA.

    Keep your itsy bitsy gas miser.

  • avatar
    toxicroach

    I bought a gas miser because its the car I actually need, and whether gas went up or down I’d be saving cash.

    Best philosophy for car buying is buy the car you need, no less, no more. That way you only suffer as much as you have to if gas is high, and you collect as much of the benefit as you can during the cheap times.

  • avatar

    OPEC has the power!
    They will probably reduce production a bit and stabilize prices.
    So they can continue to make big profits to buy up banks in America.

  • avatar
    AKM

    What happens to fear and uncertainty is hard to predict, but I think there will be a lot of irrational joy around the world if Obama is elected in November, and we could see oil as low as $70 by January.

    So it means that voting for McCain will lead to higher gas prices! You hear that, Republicans?! ;-)

    Keep your itsy bitsy gas miser.
    Word. It’s still great news that Americans have finally discovered that small cars are fun, practical, and, well, cheap; and that in most cases, they can do everything SUVs were being asked to do (i.e. commuting and getting groceries)

  • avatar
    konaforever

    I like how some “experts” were speculating on $200 oil and the end of the world.

  • avatar
    bluecon

    Good news. Now I can buy that new Dodge pickup with the 390hp Hemi.

    It also shows that the world economy has started into recession.

    Speculation is not over, you can short the oil.

  • avatar
    DrBrian

    Its not as if the price will go down now that everyone is used to £1.09 a litre(£1.21 for diesel)

  • avatar
    menno

    Did nobody else see that “one” of the OPEC members is calling for reducing production to raise prices, despite the oncoming light in the tunnel (which is going to prove to be a train coming full speed, aka a worldwide recession)?

    Here it is from the Times, via Drudge.

    http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4663676.ece

    Axel, man… were you on US31 the other day in a diesel pickup, passing my Prius then making sure to floorboard your accelerator at every possible opportunity, just to spew smoke in our faces?

    Got news for you – I had the outside air off.

    toxicroach said it best before I got a chance: “I bought a gas miser because its the car I actually need, and whether gas went up or down I’d be saving cash.

    Best philosophy for car buying is buy the car you need, no less, no more. That way you only suffer as much as you have to if gas is high, and you collect as much of the benefit as you can during the cheap times.”

  • avatar
    Areitu

    Lower oil prices strike fear in me as much as high oil prices. High oil prices constantly remind everyone that the world as a whole to become increasingly less dependent on it. The less of it there is, the more difficult it will be to transition towards an alternate (and hopefully sustainable) energy model. Lower oil prices makes everyone drop whatever they’re doing and carry on as fast as they can before prices go up again.

    Or maybe I’m just an a-hole for thinking that way.

  • avatar
    ppellico

    Look, this very sight had many, even the seasoned writers, telling us we were wrong for thinking the oil pricing was related to speculation.
    I know this to be true.
    YOU know this to be true.
    AND the TV talking heads were all over the crisis and how the real world had changed.

    But there were a few voices of reason.
    Nothing happened that caused the price of oil to skyrocket…except speculation!

    We saw the reality.
    We knew the availability of oil and the hidden drive for huge profits behind the story.
    Most specialist claiming there was no speculation/price relationship…they were all investment pimps themselves.
    They NEEDED the rise in pricing.
    They needed the trading.

    There were a few who understood that NOTHING in this world took place so catastrophic that would cause oil to go from 80 to 140…in a few months.
    These are the same people who blame the human race on the rising of the earth’s temperatures.

    However…as I said back in those discussions…I LIKE the price rising as it has opened the door of opportunity.
    We are seeing a great leap ahead in technology and companies are taking chances they were to afraid to before.

  • avatar
    ppellico

    More sad results from the drop in prices…every cowboy/cowgirl wannabe is off to get his/her biss ass, giant wheeled pick-up truck!
    The damned urban sprall will once again start the great outward spread…into the last of the farm fields.

  • avatar
    menno

    I agree with your assessment, ppellico. Of course there was manipulation, it’s happening right now in gold and silver, too. Yet, I’m pleased to see oil somewhat higher to have happen just what is currently happening; taking the complacency out of the buying public’s attitude and making us all realize that oil is finite; we’re getting much of our absolutely essential resources from enemies who would kill us all; we obviously need to stop exporting so much money and instead put people to work in our own country; and we need to be less wasteful, for all manner of reasons (one of which I can mention as a Christian; because good stewardship is demanded of us by our creator; believe or disbelieve at your own choice).

    Obviously with everything, there is balance. Oil at $200 a barrel is too expensive and has likely helped to begin the process of throwing the world into a recession, but it is only one factor in that situation, it might be added.

    Then of course, as I mentioned above, we have two (not one) nation of US enemies (in fact, enemies of virtually everyone else on planet earth, given their attitude) – Venezuela and Iran – who would be MOST pleased to keep oil above $100 a barrel and even above $150 a barrel, no doubt, all the faster to see the ruination of their enemies.

  • avatar
    Axel

    menno: Axel, man… were you on US31 the other day in a diesel pickup, passing my Prius then making sure to floorboard your accelerator at every possible opportunity, just to spew smoke in our faces?

    Actually, I try to bike to work when I can :-).

  • avatar
    AG

    US-31 is a long highway. I saw several prius’ and big trucks on it myself the other day.

    Anyway, that oil was being speculated should have been obvious for no other reason than the people who said speculators weren’t playing a role in the run up were speculators.

  • avatar
    melllvar

    Axel, ppellico:

    The relative strength of the dollar is also a factor.

  • avatar
    ihatetrees

    Areitu:
    Lower oil prices strike fear in me as much as high oil prices. High oil prices constantly remind everyone that the world as a whole to become increasingly less dependent on it….
    Lower oil prices makes everyone drop whatever they’re doing and carry on as fast as they can before prices go up again.

    Or maybe I’m just an a-hole for thinking that way.

    You’re like me – a fan of relative price stability. That’s a good thing for both conservation and production.

  • avatar
    ppellico

    melllvar

    Yes.
    Very true…the dollar has a lot to do with this.
    But only because the speculators or traders put their money into one or the other.
    If one is a shitty investment….they all run to the other.

  • avatar
    yankinwaoz

    Sounds like they ran out of places to hide the oil while waiting for top dollar to sell it to a refinery. There are only so many oil tankers that can only wait so long offshore.

  • avatar
    quasimondo


    More sad results from the drop in prices…every cowboy/cowgirl wannabe is off to get his/her biss ass, giant wheeled pick-up truck!

    I’ll be ripping up that ‘For Sale’ sign on my Expedition and putting a down payment on a brand new Challenger.

  • avatar
    ckb

    Seems a lot of comments are bashing predictions of $200 oil or saying “I told you so” regarding oil will go down to $80. However, at this point $80 is also just a prediction…

  • avatar
    ppellico

    quasimondo

    Ya got me!

    And I do believe that you can have a truck and NOT be a cowboy (or a construction worker) and still love trucks.

    Its like that other post…a car guy to me is someone who LOVES their car, but didn’t just buy it for the image it projects of them.
    Same for the truck lover.
    You can love a truck for what it is and does.
    But for all those who buy them just to look manly, thats a real kick.

    Anybody that stand in the yard or garage at night staring at their machine love…and finds any excuse whatsoever to drive it…that’s the person who deserves their car/truck.

  • avatar
    konaforever

    “Seems a lot of comments are bashing predictions of $200 oil or saying “I told you so” regarding oil will go down to $80. However, at this point $80 is also just a prediction…”

    I don’t know about $80 oil, but it’s more realistic than $200 dollar oil given where it was even a year ago. It’s not so much the price I have problems with, as much as the amount the price has changed given the factors involved.

  • avatar
    Airhen

    Axel :
    September 3rd, 2008 at 12:45 pm

    What happens to fear and uncertainty is hard to predict, but I think there will be a lot of irrational joy around the world if Obama is elected in November, and we could see oil as low as $70 by January.

    Since the democrats want to do nothing to increase oil production when we have an oil based economy, that could drive oil prices back up. One thing is for sure, should we be “blessed” with Lord Obama, America will be in for one heck of a ride, right in the wallet.

  • avatar
    yournamehere

    im dreading the “I told you so” speech from Rapid Rick….please America, please do not go flooding back to SUV/Trucks!

    “merica will be in for one heck of a ride, right in the wallet.”
    - and the last 8 years were a leisurely stroll in the park?

  • avatar

    Well, yeah, oil may have been a little inflated. But without deus ex machina, the price is going up long-term, and even medium term. Anyone who got a gas miser is not about to be sorry. And for anyone who thinks gas is going to stay down at $80, or $70,

    a bridge o’er to Brooklyn’s incredibly swell
    and to you ,for just two hundred dollars, I’ll sell

  • avatar
    psarhjinian

    Since the democrats want to do nothing to increase oil production when we have an oil based economy, that could drive oil prices back up.

    Oil is fungible.

    One thing is for sure, should we be “blessed” with Lord Obama, America will be in for one heck of a ride, right in the wallet.

    As opposed to the don’t-tax-but-do-spend-money-like-poisoned-water crowd that’s currently in office?

  • avatar
    Mark MacInnis

    Axel…..good call, i was with you….saw an article last week that said $65/barrel was fundamentelly possible, but misplaced the link….

    AAxel…wonder what the guy who had the temerity tto argue with us that “there was nno emotion involved in $140 oil” is thinking today…..he didn’t show up on the thread…

    Delighted to see that for the most part, the “best and brightest” here at TTAC are taking tthe ups and downs in the right spirit….one good thing about reasonably prices (read: price supported by fundamentals and not driven up needlessly and cynically by a-hole spectulators) is that it gives our country and the world economy a little breathing room to manuever with a hopefully a little less drastic pain. You haters out there who seem to be crestfallen that oil is down from $140 and want it to stay that way to “teach the US a lesson”, hopefully you realize that behind the statistics is a lot of pain for our citizens and extra, unneeded angst about the uncertainties of their futures. Hopefully y’all can lighten up, a little.

    But this is like the lesson my daddy always taught me….”Things are never as bad, or as good, as they seem.”

  • avatar
    Jimal

    Wonderful. Oil will be (relatively) cheap again, everyone will stick their heads back in the sand and go back to gas guzzlers, and somehow the Big 3 will still be caught with their pants down.

  • avatar
    Patrickj

    I hope oil drops to $80 a barrel. I hope to use the opportunity to get out of my SUV and into a used gas miser.

  • avatar
    srclontz

    I wonder what excuse people will use to get out of their no longer fashionable gas guzzling SUV’s if fuel prices drop?

  • avatar
    ppellico

    Patrickj

    Hey! Good, no GREAT Idea.

    I think its a little deceptive and I will feel really, really bad after I do it, but you are right.
    Use this as an opportunity to unload our gasaholic cars onto some fool.
    This would make WC Fields proud!

  • avatar
    SD 328I

    I think you have it backwards. If gas prices drop, SUV/Trucks will become fashionable again.

    Americans in general do not like small cars, they drive them because they have to. If prices drop, so will small car demand.

    So you better hope prices stay high to keep the incentive to save resources.

  • avatar
    Steven Lang

    Actually, there’s a pretty huge void between the older crowd and the younger crowd when it comes to liking SUV/Trucks.

    A lot of folks under 40 don’t want em’…. a lot of folks over 40 do.

  • avatar
    menno

    I know a brain surgeon (literally), he goes to my church. Obviously, he has more money than Iran has centrafuges. I’ve seen his house. You could fit 5 or 6 of my house in his house, including my garage. Hell, you could put 2 of my house (and garage) in his garage.

    He asked me about my Prius a few times.

    Know what he went out and bought? (He could buy anything to drive to work at the hospital – up to and including a hyper-expensive BMW, Mercedes or even Bentley, no doubt).

    He bought a Kia Spectra, for the gas mileage and for the 0% financing.

    He’s well and truly over 40, more like 60.

    Detroit and Europe are sooooo screwed.

  • avatar
    ppellico

    SD 328I
    Yes…they will become fashionable again.
    Exactly why I will then take this advantage.
    Sell them the SUV.
    Don’t really use it much nowadays.
    And when and if I do, I will rent.
    And gas will once again be high…but I will be truck free.
    I think this is a wonderful opportunity.

  • avatar
    Tommy Jefferson

    Speculation provides price liquidity. It’s a beneficial market fuction.

    Any time you see someone blaming specuation on high (or low) commodity prices, you know they are ignorant of basic market economics.

    It’s popular to lambast the Evil Speculators when prices rise. It’s not so popular to cry for the Poor Speculator when they misjudge and loose money on a market move.

    Speculators help find natural market prices faster.

  • avatar
    cleek


    ppellico :
    September 4th, 2008 at 9:28 am

    SD 328I
    Yes…they will become fashionable again.
    Exactly why I will then take this advantage.
    Sell them the SUV. Don’t really use it much nowadays. And when and if I do, I will rent.
    And gas will once again be high…but I will be truck free. I think this is a wonderful opportunity.

    Both of you gents are spot on. Generally speaking, people are gullible but not stupid.
    This oil rise cut deeply enough to leave a mark. If folks don’t need the capability or capacity they will make the rational choice…eventually. It pays to be ahead of the curve. Good Hunting.

  • avatar
    RetardedSparks

    Americans have a NOTORIOUSLY short memory.

    If gas stays cheap long enough for them to forget (and that’s not too long!) they’ll be lining up for Expeditions again by spring…. Detroit will get another case of tail-wagging-dog whiplash when SUV demand skyrockets and they all scramble to switch their factories BACK to truck production, and they’ll whine “OK, there’s REALLY no way we could have seen THIS coming!”

    The myopic follies will just go on and on….


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Contributing Writers

  • Jack Baruth, United States
  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Vojta Dobes, Czech Republic
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Cameron Aubernon, United States
  • J Emerson, United States