Oil and War
There's Conflict Overseas, and Oil Prices Are... Down? How Long Will it Last?
abcnews.go.com
By M. Corey Goldman
NEW YORK, Oct. 22 — Perhaps it was memories of the past that led so many to initially believe oil prices would skyrocket in the wake of last month's terror attacks. After all, trouble in and around the Middle East usually means in no uncertain terms that oil prices — and gas prices — are going up.
On the contrary, however, oil and gasoline prices have actually declined since Sept. 11 on expectations that fewer planes flying, fewer factories operating and a general drop in economic activity has and will continue to lower demand.
The reason, analysts say, is because of what they call in the business oversupply. With reduced demand for oil at home and with the Organization of the Petroleum Exporting Countries holding production steady, there is more oil flowing right now than anyone needs, ensuring that prices — at least for the moment — will likely remain low.
...............................................................................................................................
Prices Could Spike
At least that's how it is at the moment. But there are growing rumblings among analysts, economists and politicians that, with war raging in Central Asia and with tensions mounting in the oil-rich Middle East, both oil and gasoline prices could be significantly on the rise in the months ahead.
"It is quite feasible that we could see prices rise if conditions overseas escalate in some form," said Steven Pfiefer, an analyst with Merrill Lynch. Pfeifer and several other analysts are predicting higher oil prices in similar fashion to what the U.S. experienced during the 1970s, when restrained production from OPEC and military and political volatility in the Middle East led to skyrocketing oil prices and fuel costs.
The difference in opinion over whether those risks will play out has led to a wide divergence in where experts see oil prices going in the months ahead. Some see crude oil falling to between $18 and $20 a barrel as global demand continues to slide, while others see it jumping as high as $28 and $30 a barrel. |
