Oil At $25, Gas At A Buck?

December 5, 2008 by Douglas A. McIntyre

Tx00338coilwellgusherodessatexasp_2More people in the oil industry and the services businesses that support it are going to be out of work soon. That is because crude dropped from $147 to under $50. Venezuela could be looking at problems repaying it national debt. So could Iran. Russia’s plans for expanding its economic and military influence could be compromised.

A Merrill Lynch analyst says oil may be going to $25.

Of course, for all the families that were spending hundreds of extra dollars for gas each month last summer, it is good news. Now, they can afford both their car and their mortgage.

According to The Guardian, “Oil prices could slump to just $25 a barrel next year, as much of the world sinks into recession and demand falls, according to the latest predictions from Merrill Lynch.” Drops in demand in both the US and China will be big contributors to the plunge.

But, be careful what you ask for. You might get it. Big money center banks won’t be helped if sovereign governments start to cut back on debt service.

And, deeper recessions in oil producing nations will not help demand for US goods and services exports

Douglas A. McIntyre