Why are crude oil prices getting hammered?
Best Answer
321 points
charlo answered 9 months ago …
just want to add that speculators were probably forced to exit out of their positions too, given the ample real lack of demand in oil where they would just be hammered more.
i don't know if oil might go down to $15 given that OPEC will probably impose serious supply restrictions to continue to pay for their lavish parties and luxury cars.
Answers
3963 points
MNSL answered 9 months ago …
In short there is demand destruction.
We get recession in USA, UK, Europe, Japan, and Australia. They use less oil now. Demand from other countries such as India and China also have come down.
I think oil will go down to as low as $15 a barrel before it rebound to $30 to $ 40 level in 2009.
If we want to see rapid world growth and want to generate more employment, all types of cost such as transportation and shipping cost, production cost, fuel and power cost, maintenance cost, commercial rent, overhead cost including wages of top executives, technology cost should come down drastically. Unless this happen I do not think their will be good demand for products and services in the future. Many industries and businesses will collapse. We will have one of the worst depressions.
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368 points
ads answered 9 months ago …
Travel is dramatically down throughout a lot of the worlds economies, are people are trying to spend less on luxury items and extra expenses (vacations, etc.). We also need to take into consideration the fact that much of the oil demand is from industry (plastics, chemicals, etc) which have all been hit hard by the economic downturn. Meanwhile, since the prices had been so high there had been a fair bit of additional pressure put on increased prodction (despite the rising costs due to all of the "easy oil" having already been pulled out of the ground). As such I think some of the oil producers have been a little reluctant to back off too much on production since many of them are expecting the prices to rise again before long (once the world economies start to turn around and demand starts to increase again).
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