Do you think Oil could go to $20?
Best Answer
411 points
jester112358 answered one year ago …
No, this is below the cost of marginal production (i.e. the cost of extracting oil from the typical or average well). If you don't understand marginal production as the other comments clearly indicate, don't invest in commodities. When it costs more to produce something than you can get for marketing it, you simply quit selling it (too bad the auto and home building companies don't understand this). This is what is happening right now and it setting up the mother of all commodity shortages in a few months.
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2222 points
readytoretire answered one year ago …
I don't think so. If it did make it into the $20, it would be at the high end. I think OPEC will try to bring the decline to a halt this month when they meet. The environmentalists will clamor for something to be put in place to prevent us from going back to the big old SUVs, so even if it stays in the 30's for a while, I expect the government will take advantage of that to increase the tax on gas, to cover improving the roads.
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3963 points
MNSL answered one year ago …
Sometimes it can go to $20. Even gold and other commodities and assets will have severe correction in the next six months.
Only two sectors will benefit most and during May 2009 and specially there will be bullish market for these two sectors.
Merrill Lynch and some industrial experts think oil will come down to$25 now. I agree with them.
http://africa.reuters.com/wire/news/usnL5709402.html
Oil prices are likely to keep falling until well into next year and could reach $25 a barrel before recovering, U.S. bank Merrill Lynch has said. They expect modest recovery in the second half of 2009
Merrill Lynch said a combination of high oil prices and high leverage had proven dangerous for the global economy.
http://www.marketwatch.com/news/story/Merrill-Lynch-Research-Expects-Globa l/story.aspx?guid=%7BCC876734-5B87-400C-8D86-FCF00A9D0D1E%7D
Leveraged countries such as Australia, Switzerland, Korea, Hungary and the euro area are among the most vulnerable economies. Less leveraged countries, such as Nigeria, Mexico and the Philippines are the least vulnerable
Merrill Lynch has identified four further themes for 2009:
1.Developing world economies to be less vulnerable to the downturn
than developed world economies
2. Governments likely to intervene via further monetary and fiscal
easing
3. Limits and side effects of stimulus packages to emerge
4. Growth to rebound in the first half of 2009 before petering out
678 points
BoxCar answered one year ago …
Supply and demand will limit fall in oil price. When it gets too low to produce~ $25
it will rebound but there's been major demand destruction since so many items
are made from plastics/synthetics that come from oil and retail sells are down too.
On a recent trip to Tucson, AZ I set cruise control at 70mph and found myself passing most all the trucks. On later investigation I found that major companies have reset the speed limiters on haulers. If speed drops by 20% fuel consumption goes down also, proportional to velocity squared so fuel reqd drops by (20%x20%)=40% Means fuel cost drops from $4 to $4 x 1.6 = $2.40 or less since speculators are getting out now
