LightSweetOil.com

The prices of oil skyrocketing in 2008 added to the global recession. Domestic markets relied heavy on the much lighter and cleaner sweet crude oil. The producers of this kind of oil are the Arab nations of Saudi Arabia and Iraq, along with some other eastern nations such as Indonesia and the small country of Malaysia.

The price of oil has rocked sky high and peaked at $147 a barrel in July of 2008, however with state of the economy even the OPEC cartel could not keep of the prices elevated when demand slowed down. Presently there is a drop of about 70 percent in the oil prices as of the first quarter of 2009. The prices are hovering around $47 dollar a barrel at this time. Yet this decrease still does not change the fact that prices are still far higher then they were only 10 years ago. The strain on the economy is bearing that brunt. The upside of all of this is that some analysts are forecasting that oil prices will continue to drop.

One of the counter solutions to keep down the prices of oil and the dependency of the USA on foreign markets is to use the nation’s oils reserves, thus cutting down on sweet crude oil in favor of the cheaper heavy crude oil. Certain democrats have already filed a bill to bring this plan into effect. The reason for doing so is to counteract the rising costs of sweet crude oil. This proposal has been tabled before but failed to pass the two chambers. The present Obama administration is in favor of making the shift to keep down oil prices. The revenues from the shift to American Oil will be used to replenish the nation’s reserve and bring it back up to its required levels of 727 million barrels. It is speculated that this shift will make the USA more secure in producing its own oil and becoming less dependent upon other nations. This protectionist move has found many avid supporters.

Though it was expected that after the inflationary prices of last year peaked there would be the deflation of prices. The current drop was never predicted. Oil prices were expected to drop to $80.00 a barrel not $47.00. This turn of events has gotten some governments across the world into taking a serious look at the forecast of oil for industrial nations. The Government of Norway has announced its concerns that its gas and oil companies have not invested in long-term solutions for preservation of the oil refineries in their country.

China is eyeing the current fall in market demands of oil and will buy up as much surplus as they can, despite the fact that sweet crude oil is still dropping. The speculation of course is to sell it higher prices later when prices rise again.

Forecasters see a bottom to this downward spiraling of oil prices with a less volatile price drop lasting for the duration of 2009. The Elliott Wave theory would predict that after the massive decline, the prices would rise again to about $80.00 a barrel and level off there. This forecast is for the next 12 months, however, some speculators say that rising prices perhaps reaching the $200 dollar mark should be expected in the next 5 to 10 year period.

Light sweet crude oil prices today are on the rise again. People across the United States easily remember what happened to us last summer. The price of gas rose above $4.50 per gallon in many areas and some gas stations actually ran out of gas. We had many instances of gas price gouging as well. Some of these gas stations were brought to trial for taking advantage of the American people and are being forced to make repayments.

Right now they are averaging about $2.69 per gallon up about 17 cents in the last two weeks. With the summer people start thinking about taking some time to get away. Most are trying to save money because of the state of the economy and were planning on going some place that they could drive. Now many Americans have to re-think their plans and possibly shorten their stays due to the increased cost of gasoline.

The economy of the United States is in the worst shape that it has been in for a long time. Many people have lost their jobs or have had their pay or hours cut. People looking for second jobs are competing with people recently let go from their jobs. Even college students are having a hard time finding their first jobs. People are cutting back on everything that they consider a luxury. Travel is usually amongst the first to be cut. This means that airlines, luxury hotels and car rental companies are feeling the pain too. People were turning back to taking trips by car when ever possible.

The country saw an increase in automobile travel once the high gas prices from last year finally fell but now as they steadily increase each week people are cutting back again. The price of crude oil is always in the news as countries cut back on production in fear of running low or increase production because demand is low. It is always fluctuating.

When light sweet crude oil prices rise people start thinking about changing their driving habits and the car they drive. Hybrid cars are becoming more popular as drivers try to avoid the high gas prices. Some hybrids can get over 50 miles per gallon which can save people a lot of money.

The market is forecasting crude oil prices to keep rising during the summer months before it drops again in the fall. It seems like every time something happens in the world it affects crude oil prices. Acts of terror and unrest in the middle east are usually the first trigger points to cause our oil nations to hold back.

The United States has put a greater emphasis on finding alternative fuels. This can help the average consumer and also help with global warming. Wind energy plants are springing up across the country and towns and states are debating off shore drilling. If we had our own supply of crude oil we would be better prepared for those times when crude oil prices are out of control.

The recession in America has dramatically cut demand for crude oil, and inventories are piling up. The lighter the oil it is, the less processing is needed at a refinery and the costs are lower. Recessions usually bring cheap oil and gasoline. But not now. Crude oil, the lifeblood of the global economy, costs $61.67, even as the world struggles through the worst recession since World War II.

U.S. crude oil inventories are at their highest levels in almost two decades, and demand has fallen to a 10-year low, but crude oil prices had climbed more than 70 percent since mid-January to a six-month high of $62.04 on Wednesday. Light, sweet crudes are preferred by refiners because of their relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel.

The brief respite from last summer’s record-high crude prices, which aggravated the global economic slump, will soon give way to another oil-price spike that may be more painful than the last one. The reason is the decline of such super fields as the North Sea, Alaska’s North Slope, Mexico’s Cantrell Field and Saudi Arabia’s Ghawar Field – largest in the world – along with the extraordinary cost of producing crude from the few remaining newer crude sources.

Light, sweet crude for June delivery settled 60 cents, or 1%, higher at $58.62 a barrel on the New York Mercantile Exchange. June Brent crude on the ICE Futures exchange settled 65 cents, or 1.1%, lower at $56.69 a barrel. Futures proved unable to resist gains in U.S. equities, which have set the course for the oil market for much of 2009. Stocks have risen along with investors’ hopes for a quick end to the global economic downturn, which should bring with it a rebound in oil demand.

For the first five weeks of the year, unleaded gas supplied has increased at 2.0% compared to the same period last year. Domestic crude oil production has been declining at about 2% per year, for the last however many years, except because of the hurricanes, the 2005 numbers were a little worse. There is an inventory buffer working in U.S.’s favor. Opec/Saudi is apparently determined to cut back on their production. This means that the inventory of crude oil will start to drain toward the end of March, and will seriously drain throughout May-July. The amount of actual drainage can be computed once we know exactly what our imports are running for this period, but keep in mind that a half million barrel per day drain is a 3.5 million barrel per week drain, so we could be down under 300 million barrels after about 10 weeks at this rate of drainage.

The refineries in the latter half of 2008 were paying top dollar for oil, and then producing gasoline in a low-demand economy. Now, refineries are producing less, driving up prices in even this low-demand economy, while stockpiling discount oil. The fear of lower demand pushes prices higher. The refineries have slashed production just to avoid taking losses on gasoline no one will buy.