Predictably, the price of crude oil slid down quickly as the U.S. presidential election approached. Also, predictably, oil refineries drew down inventories and are now in the process of refilling them with lower priced crude oil. This process is all good news for the U.S. consumers because gasoline and diesel prices will drop. Unfortunately, prices for heating oil supplied to the northeast might remain high in some areas, depending on how much higher priced heating oil remains in storage at the local storage facilities (intermendiate suppliers).
The danger of the crude oil price slide is an over-correction. The market is already well supplied. Although a drop from $145 to $50 per barrel will definitely slow production of some U.S. fields due to high cost of production, foreign oil sources, especially OPEC, can still profit significantly at prices below $20. Those countries that have been receiving huge inflows of cash for production may well forego the call to restrict production and, instead, will attempt to increase sales to make up for lost revenues as prices plunge. The potential is a flooded market and an unchecked slide in prices. International data runs 3 to 5 months behind, so even though OPEC may agree to cut back production, it is not uncommon for members to fail to comply with their quotas without early detection.
Like other times following crude oil price spikes, low to moderate prices may hold for up to 8 years. Alternative energy proposals may be shelved and the aggressive efforts toward controlling global warming could be significantly inhibited for the next few years, especially if prices sink below $45. - George Clemen
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