Right now oil and gasoline prices are low, but are they likely to stay that way? This article says yes for most of 2009.
As we close the doors on the strange and tumultuous year that was 2008, analysts are looking ahead to what 2009 will bring. So far, signs are mixed. The Energy Information Administration projects crude oil will trade at an average of $51 a barrel in 2009, translating into low gasoline prices:
Along with lower projected crude oil prices, annual average retail gasoline and diesel fuel prices in 2009 are projected to be $2.03 and $2.47 per gallon, respectively…The U.S. economic recession is also contributing to lower natural gas wellhead prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.17 per Mcf in 2008 to $6.25 per Mcf in 2009.
The chief energy economist of Deutsche Bank, Adam Sieminski, said recently that the demand for oil in 2009 will drop more than any other time in the last quarter of a century, due to the weak economy. Sieminski forecasts oil traded in New York falling as low as $30 and averaging $47.50 for the whole year. He says higher forecasts haven’t adequately factored in how the global downturn will hurt oil demand.
Others see the supply-demand balance starting to tip in favor of higher prices later in the year, thanks in part to OPEC’s plans to cut output. Paul Stevens, a professor at the UK’s Royal Institute of International Affairs, said:
In 2009, we will see continued prices weakness in first half or quarter of year. A lot depends on demand and that depends on the nature and depth of the economic recession…if demand does not completely collapse, my guess is that as we move through 2009, as OPEC’s determination to defend its price bears up, then prices will creep up to US$70, to US$80 that they want.
This is good news for the economy. However, OPEC is determined to get the price back up to a more acceptable level. So when the economy does recover it is likely that we could see oil prices move upwards rather sharply. Especially if during the economic downturn and period of lower prices oil companies cut back and lay off employes and cut back on new investments, especially in refining.
