The Peak Oil Myth

[ThatHawaiiGuy]

Oil remains below $50

Crude prices turn slightly higher after being pummeled by demand concerns on Monday.

http://money.cnn.com/2008/12/02/markets/oil/

By Kenneth Musante, CNNMoney.com staff writer
December 2, 2008: 10:36 AM ET


NEW YORK (CNNMoney.com) -- Oil prices remained below $50 a barrel Tuesday, after dropping below that mark the previous day, on concern about slowing global demand.

U.S. crude for January 2009 delivery rose 24 cents to $49.52 a barrel in electronic trading.

A day earlier oil prices plummeted more than $5 a barrel to a 3 1/2-year low as traders focused on atrophied energy demand being caused by the slowing global economy and a spate of gloomy economic reports.

"People are worried about their jobs, about their ability to pay for Christmas," said Tom Orr, head of research for brokerage Weeden & Co.

Slowing economy: Businesses and consumers in the United States, the world's largest oil consumer, have been under intense pressure.

High unemployment and potential collapse of the U.S. auto industry have led many to cut back on fuel use in spite of falling gasoline prices.

During the past four weeks, U.S. demand for gasoline has fallen to about 9 million barrels a day, down 2.8% from last year, according to the Energy Department. On Tuesday, motorist group AAA reported that gas prices fell for the 76th consecutive day to an average of $1.812 per gallon.

Stocks have also taken a pummeling as the Dow Jones industrial average lost 7.7% on Monday, and manufacturing activity hit a 26-year low in November, according to the Institute for Supply Management.

"People are getting slaughtered in the market, and they're getting laid off left and right," said Orr.

OPEC: Investors have also been waiting to see what the Organization of Petroleum Exporting Countries will do when it meets on Dec. 17 to discuss crude prices, which have fallen more than 66% since hitting a record high of $147.27 in mid-July.

OPEC members produce about 40% of the world's oil and include major exporters such as Saudi Arabia and Venezuela. The decline in oil prices has prompted many OPEC members to advocate production cuts in order to keep prices from falling further.

Over the weekend, Saudi Arabia's King Abdullah said told a Kuwaiti newspaper that $75 a barrel is a fair price for crude.

At an unscheduled emergency meeting in Cairo this weekend to discuss falling prices, OPEC decided to wait until the December meeting to take action, thus refocusing investors onto declining demand.

Compliance: Many investors believe OPEC nations have been inconsistent in their compliance with the organization's October decision to take 1.5 million barrels a day off the market.

Saudi Arabia, OPEC's largest producer, said over the weekend that it hoped member nations would meet at least 80% of the goal. Many investors took that statement to mean OPEC had not yet reached its pledge, with some pegging compliance at as little as 60%, according to Orr.

The failure of member nations to fulfill their existing obligations may put the burden of a second production cut squarely on the shoulders of Saudi Arabia, he added. To top of page