Oil to Plunge Below $25 Next Year, Merrill Lynch Says

Oil to Plunge Below $25 Next Year, Merrill Lynch Says

www.foxnews.com

Crude oil prices may crash below $25 a barrel next year and gas prices could fall below $1 a gallon if the global recession spreads to China, an energy analyst and CEO said Thursday.

Demand for oil will continue to decline in 2009 as economic growth slows to its weakest level since 1982, Merrill Lynch Commodity Strategist Francisco Blanch concluded in a report.

"A temporary drop below $25 a barrel is possible if the global recession extends to China and significant non-OPEC cuts are required," Blanch was quoted by Bloomberg as saying. "In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations."

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Now this is interesting. I remember back about 4 months now where a few on this site were telling people invested in oil that they should get out. Then I would see all of the replies telling the person to "F" off and get real. Well, this is VERY interesting indeed.

To see gas at under a $1 again would be quite a shock. What do you people say now? The ones that told the other posters to "F" off.

www.foxnews.com
(visit the link for the full news article)

not possible as OPEC will cut down production , before any such event


secondly, the PR Chinese economy is being given massive stimuluses by the chinese govt

reply to post by sadchild01


I agree. However, it was also stated that oil would not be allowed to drop below $75 with the same arguments. It's interesting to see how often things that are improbable actually come to fruition.

I can promise Merryl and Lynch who are bankrupt.
That Oil goes up and down, every day.
Who cares about what its at next year.
That's the easy guess from someone just out to get a quick buck for there dribble.
Most people only care about where its going to be tomorrow.

It's not that simple and although this seems like a good thing... it's not. The reason that oil projections are going so low is an indicator of exactly how bad the world economy is expected to get. We're not pumping more oil, the demand is crashing as the world economy collapses. Oil may hit $25bbl but far fewer entities will be able to buy it. Bad, very bad news.

OPEC is stuck in a quandrary. Sure, countries like Saudi Arabia, UAE, Kuwait and the like may be willing to cut production (they are wealthy countries) but how will that fly with the smaller, less affluent countries like Venezuala, Algeria, and Angola? Or non-OPEC countries like Russia, Mexico, China, etc.?

A point is approaching when oil producing nations will find themselves in an every-man-for-themselves situation. It's coming sooner than you think. Ultimately, the market will prevail. It always does.

reply to post by jtma508


Agreed. Oil too low will de-stabilize some of these oil producing countries which are really just third-world countries with money. Noveau Riche.

It always gets ugly when the money runs out. Just as incidents of domestic violence rise in economic hard times, it can also cause otherwise stable, friendly governments to collapse or cause trouble in their regions.

[edit on 5/12/2008 by kosmicjack]

Oh sounds very intersting.

I do a curry delivery job in the evenings and this will help out alot.
Provided that petrol costs come down

This is propaganda to get people to drive over the holidays and have confidence in oil again. Oil will NEVER be allowed to fall that low. Between OPEC , Russia, China, and U.S. companies, this is nothing but a ploy to right themselves from the drastic drop in prices. Stay the course and mind your driving folks.

low oil = low manufacturing=no jobs

One problem, while I was one of those that told on the raise of the oil, we are now facing a different tune, the recession is hitting hard in America and even if OPEC decrease production, the ones here in the US that controls the prices of gas can not risk to have prices getting to high as the economy would not be able to afford it.

Payrolls plunged by 533,000 last month, the biggest loss since December 1974, after shrinking a revised 320,000 the prior month, the Labor Department said today in Washington. November’s losses exceeded all 73 forecasts in a Bloomberg News survey. The jobless rate rose to 6.7 percent, the highest level since 1993.

During 1993 gas prices were around 30 dollars a barrel and we may see it again.

bloomberg.com...

Time for the profit makers to start losing profits as they have to keep the prices of gas low in order to still have gas demand in the nation amid the high unemployment rates

Lindsey Williams......paraphrase.... ~last week on Alex Jones

"The banks control oil and can put the price anywhere they want. Oil will NOT go above $50 for the near future all to bankrupt the Middleast, Unless
they drop the dollar as the oil currency and bankrupt teh USA...."

Welcome to the world of 'deflation'.

It is a murky world where the initial dip in pricing soon becomes what appears to be a sector wide correction in prices where they drop across the board which then infects other sectors of the economy, sucking each one of them in to an ever growing vortex of prices dropping on everything . . .

Sounds so sweeeeeeeeeet, does it not?

The problem is, deflation is often based on fear. People continually baraged by reports of economic upheaval hold back on purchases, thus driving the prices down. It is simple supply and demand logic. That feeds the vortex of deflation.

As demand for goods and services drops, companies' profits plummet, leading to layoffs, reduced working hours, and yet more declines in stock prices.

The vortex grows, pulling downard prices of everything. As a result, people grow to expect that prices will continue to fall and further withhold spending on the belief that things will get cheaper.

And the vortex grows again with dwindling earnings, dipping profits and production cuts which then become layoffs and a reduction in available moeny to make purchases leading to economic doom and gloom in the media.

Governments cut interest rates and try to free up capital to feed the economy, but eventually that stops working and the vortex grows.

Rinse, later, repeat . . . until the vortex grows to the point that the economy dies a horrible death.

Any of this sound familiar?

So, while on its face $25 per barrel oil and $1 gasoline sounds great, it is really only a symptom of the underlying malaise.

It's all based on supply and demand. Right now, the supply is high and the demand is low, hence the cost is lower. You would think that because the cost is less, people would be driving more. But, they are not because everything else is higher. I am driving less, everyone I know is driving less, and doing a lot of other things LESS. We're buying less because everything costs more and there is just NO money. Aside from retailers increasing the cost on everything (especialy food), out cities and towns are taxing (or more likely "feeing") us to death, because they are fiscally failing.

OPEC can cut production, which would reduce the supply, and increase the demand, but it would also increase the cost. Will people buy more? The answer is NO. At some point, reason takes hold and the average person starts to ask themselves "Is it really worth the extra cost for the benefit I receive?" I believe that question was asked by the masses earlier this year when it reached $4.00 a gallon. You're seeing the response.

Its not the end of the world. The vortex does not continue forever.

There comes a point when lowering of prices does start to make buying more attractive and the downward spiral levels out and eventually stops.
Then the slow creep upwards begins again.

The interaction of supply with demand as has been noted, like the brakes and accelerator on a car, speed up and slow down the economy as needed.

Pricing oil too high earlier this year was like putting the brakes on. Reducing the price low enough will be like stepping on the accelerator.

The economy will recover eventually so long as the gangsters in charge don't run it off the road entirely.

reply to post by wayno


The economy and the nation needs some major laws and policies to be enacted, some repealed from previous administration and many just need to be enforced.

Because our laws when it comes to corporate America and their profits margins are redacted by then, right now is easier to leave the laws the way they are and keep applying band aid to the problem as with the (bail out), as the nations debt keeps increasing and our ability to function as a nation comes to a halt the nation will not recover it will plunge into a depression.

As long as Washington is run by corporate corruption we are heading but nothing but the bottom because they don't want to compromise in favor of The America hard worker tax payer

reply to post by dariousg



That is great news for the economy. When the price of crude went up to 145 dollars a barrel people could not afford the cost of fuel causing in my mind the total colapse of everything that uses this product. And not being able to afford the product when they needed the product caused in my mind the colapse we saw in housing, its like trickle down.

On and on and on we go.
But we are just trying to set up some pathetic little thing.
Because we lost our money speculating on oil.
Or we care were oil is tomorrow?
Because we have to drive to our empty slave like work?
Why does no one worry about the price of corn or wheat?
When that's what we eat?

Yes I believe prices will fall especially on real estate,I'm thinking prices like back in 84,when people have no money doesn't matter what price is,no one will be able to purchase

Look, if it happens in the context of a bad recession hitting China, that's not a bad thing. We don't want rivals on the world scene, do we?