oil & gas prices 2009

Falling gasoline prices are every consumer's dream come true.

After the nightmare of $4 pump prices in 2008, it would be tempting to sleep through the next few months with images of buck-a-gallon gasoline dancing in our heads.

But not wise. Today's or next week's or even next month's price at the pump doesn't begin to tell the story of what's ahead for energy.

The global recession and global warming -- and what government does about them - will affect the price of every form of energy you buy in 2009 and into the future.

And in Ohio there are additional issues that could spike power prices, making the state even less competitive, and new mandates that probably will make consumers even more conscious of energy prices.
Here are the scenarios, nightmarish and otherwise.

The recession

The global economic slowdown burst the oil price bubble months ago, sending speculators and institutional investors scrambling to unload commodity contracts -- driving oil prices from a high of $147 per barrel last July to below $40 now.

Even the most optimistic economists see a weak global economy through the first half of 2009, no matter what governments do to bail out ailing industries or prop up spending.


THE STORY FOR ENERGY

Highlights of 2008

• Natural gas prices began increasing in late winter and really gained steam in the spring. The prices, over $13 wholesale by July 1, helped spark a North American drilling boom. Then the bubble burst, just as a stream of new supply hit the market in late summer.

• Oil prices rocketed to more than $147 per barrel on July 3, and the price at the pump surged past $4 for gasoline and threatened to breach $5 for diesel fuel, the lifeblood of the economy.

• Gov. Ted Strickland, state lawmakers and the utilities reached a tenuous settlement on Strickland's bill that tried to end Ohio's disastrous dabbling in deregulation.

Outlook for 2009

• You might see $1 gasoline, briefly, before spring arrives. But oil would have to drop to $25 a barrel, meaning the global recession will have deepened. Expect prices at the pump to breach $2 again in the late spring, at the start of what Americans once called "the driving season."

• Home heating bills, especially for natural gas, are on a trajectory to stay low. But a slowdown in drilling for new gas, which has already begun, means lower supplies, perhaps as early as 2010, which would push up prices.

• Energy efficiency, green energy and green jobs will become the shorthand terms for the transformation that is just beginning to shape how Americans think about energy and what they pay for it.
The continued slowdown means demand for oil and refinery products should remain weak, keeping prices down. Most analysts think the slow recovery will keep demand and oil prices in the basement for at least the first half of 2009.

Could gasoline prices drop below $1 per gallon in the next few weeks, as some analysts believe?

That might happen in isolated areas, said Tom Kloza, senior analyst with the Oil Price Information Service in Wall, N.J., but it won't be the national average.

Kloza sees national average prices between $1.40 and $1.60 for the next couple of months and then rising to the $2 to $2.35 range in the spring and early summer.

The outlook for home heating using natural gas also is good for consumers. Wholesale natural gas prices have followed oil down into the basement, from more than $13 wholesale per 1,000 cubic feet last July to under $6 now.

The U.S. Department of Energy predicts that natural gas prices will stay where they are for 2009, a forecast some local gas producers glumly agree with.

The low natural gas prices are driven only partly by the recession. New North American gas fields have bolstered supplies, and prices are not really affected by foreign gas, very little of which is imported.

But there are signs that the 2008 boom in production from new fields is slowing, said Christopher McGill, managing director of policy and analysis for the American Gas Association in Washington, D.C. Producers are cutting back on new drilling, he said, and there is talk in the industry of a 20 percent cutback in the coming months.

A drilling cutback won't cut off supply that quickly, countered James Halloran, energy analyst with National City Private Client Group.

"There are new wells just coming on," he said. "We'll see a fair amount of new gas in the first quarter. And the United States has more storage capacity than any other nation. You may see [foreign] gas coming in during the off-season. This will keep prices reasonably low until some time in 2010."

http://blog.cleveland.com/business/2009/01/gas_prices_wont_tell_story_of.html

What does everyone think?