Monday, May 17, 2010

Oil Prices Plunge 20 Percent in Two-Week Period

While oil companies may not like it, consumers definitely will, at least when the price of gas starts to move down in unison with the price of oil, as oil has dropped 20 percent just a short two-week period.

Like most other raw materials and products, concerns over the European debt crisis and the inflation China is battling has companies and investors concerned over the demand problem and how it'll effect companies and their exports.

Not just that though, as it's not just the existing European crisis everyone is worried about, but whether or not it's about to become a contagion which brings the global economy down with it.

This will especially have a dramatic impact on commodities and countries and companies producing raw materials, as that will probably take a significant hit in the short- to mid-term if things get worse at all, and probably even if they stay where they're at now, as the fallout from Europe has yet to be revealed outside of Greece, and that information is probably going to be released in stages in an attempt to manage the potential panic that could come with it, which could cause a run on an unknown number of banks, as it did with banks in Greece.

Just a couple of weeks ago oil seemed to be assured of a long and profitable run-up in prices, now it's debatable as to how low prices will go throughout the usually busy summer season, and even further beyond, as more than likely consumers will cut back on travel because of the fears of what could possibly happen to the economy with more negative factors out there that are not small by any means, including the China inflation factor, which has been largely over-shadowed by the EU debt crisis; but it is every bit as real, and could cause numbers projected and expectations to be far too optimistic in light of the new circumstances.

In early May, oil prices had hit 18-month highs of $87.15 a barrel, and on Monday they had plunged to $70.08.

If oil prices stay at around $70 a barrel, it is expected to would drop from between $2.60 to $2.65 a gallon on average, with some places in the U.S. enjoying $2.50 a gallon.

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