Commentary By Ron Beasley
Instead of the predicted $5.00 a gallon gasoline this summer it looks like we may have $3.00 a gallon instead. The sinking economy is of course responsible for the sinking oil and gas prices but there is a floor - companies won't produce is they can't make money. I think we are at the floor for crude oil prices. The last couple of days the price for WTI has dropped below $80.00 bbl.
It would appear the floor for crude is about $80 bbl. There are reasons for this. The non conventional sources need $80.00 bbl to be profitable. That includes deep water drilling, fracking and the tar sands. In addition The exporters like Saudi Arabia need $80 to $100 bbl to finance their social programs that keep people from revolting. Here in the US we can't afford to pay as much as they do in the rest of the world because we use it less efficiently and it's world demand that determines price. So we may see $3.00 a gallon gas in the fall but don't expect it to go much lower or stay that low very long. The producers are not going to keep producing when they are losing money.