How Long Will the Price of Oil Remain This Low?
Source: Seeking Alpha (12/3/08)
The question most people are asking is: How long will this last? Well, apparently, the technical specialists seem to think that there could be another 50% slide from current prices and more fundamental analysis also suggests a bit more down side, but not more than another 20%.
One of the key issues here is how OPEC will deal with the slow-down and if they will start to adapt supply but cutting production. This is a tricky balancing act as if they cut too much, once things start to get better the increased demand will probably lead to a jump in prices and with speculators jumping back in, we could see another prolonged spike.
On the other hand, if prices fall below 35 USD per barrel, something drastic might have to be done, as this seems to be an important P/L benchmark for the OIL industry (most planning is done at 50-55 USD levels - meaning a 40-50% gross margin).
Nevertheless, what is safe to say is that:...The world is far from being able to replace OIL with alternative energy in the short-term...