Oil prices good for consumers,
but battered sector gets fried
By Steve Gelsi, CBS MarketWatch
Last Update: 5:13 PM ET Nov 30, 1998 Futures Movers
NEW YORK (CBS.MW) -- Already battered, U.S. oil company shares got fried Monday as prices slid below the psychologically-important $11-per-barrel level amid a global glut.
But it's good news for consumers as prices at the pump -- adjusted for inflation -- could hit the lowest level since the 1930s.
"What's bad for producers is good for consumers," said Irwin Kellner, chief economist for CBS MarketWatch.com and economics professor at Hofstra University. "This has the effect of a giant tax cut coming at the most important time of the year for the nation's merchants. It puts more money into people's hands."
January crude oil futures fell to a low of $10.82 a barrel Monday afternoon, although they closed at $11.22 on the New York Mercantile Exchange. (See Futures Movers)
John Lichtblau, chairman of the Petroleum Industry Research Foundation, said average prices at the pump are now under $1 a gallon in the U.S., about 17 cents below last year's rate. Costs could fall even more.
"It could stay at this $11 range for some time," he said. "It's a mild winter and gas demand is low. The economic crisis in Japan and Asia has also caused world consumption to drop."
Lowest since 1986
The last time oil prices were this low were 1986, when the price of oil dropped below $10 per barrel, Kellner said. Accounting for inflation, gas prices are dropping to levels comparable to the 1930s.
Prices at the pump, already falling, should continue to drop within the next several days, he said. The sector fell despite recent optimism over the possible merger of Mobil and Exxon, which could be announced Tuesday according to press reports.
Exxon (XON) rose 5/8 to 75 and Mobil (MOB) was unchanged at 86, but others dropped. Texaco (TX) lost 3 1/8 to 57 11/16. Arco (ARC) fell 3 7/8 to 66 1/2. Chevron (CHV) dropped 2 to 83 5/8.
The American Stock Exchange's oil index lost 2.75 percent to 443.34.
Deutsche Bank trimmed its 1999 forecast to $14.50 per barrel from $16 on Monday after as the Organization of Petroleum Exporting Countries (OPEC) failed to ease the global glut at its annual meeting in Vienna last week. |
