Tuesday, October 21, 2008

Comment: Oil Barons see reversal of fortunes

The oil industry hit the jackpot with the Bush administration. Prices went through the roof almost reaching $150 a barrel. Companies like Exxon made unprecedented profits. How much they owe such success to the Bush family's oil connections is a matter of debate.

Now, in less than a month, things have dropped off the cliff for the oil barons. As I write this oil is trading at $70.47 a barrel, off less than half its highs from July. Stocks also plummeted for most of the oil companies. Texas-based Exxon lost 20 percent of its value so far this year it's worse drop since 1981. Houston-based ConocoPhilipps was off 35 percent, while Chevron of San Ramon, California was down 25 percent.

However, the oil industry is still expecting profits for this year because of the record high oil prices before the financial meltdown.

No doubt, though, that companies are preparing for declining demand as the world economy slows down.

Unfortunately, for consumers, gas prices cannot be expected to follow oil prices in a precise manner. Although gas prices have been going down, they probably will never equal the cuts in oil prices. The problem is that oil refinery capacity still probably will not be able to keep up with demand evem as the economy slows.

Washington Post

From $140 a barrel to $70: How oil prices halved in a matter of weeks
MyWestTexas.com, TX - 11 hours ago

Natural gas prices did not suffer as much as the other facets of the energy sector primarily due to a less-than-expected rise in supplies, but declined ...
Falling oil prices give consumers a break Los Angeles Times
Gas Prices Dropping: The Good News and Bad News TIME
San Diego Gas Prices Continue To Slide KGTV, 10News.com