Saturday, September 23, 2006

Pickens: It's the fundamentals.

I dunno, maybe he's a Star Wars fan too.

Dallas Business Journal: Pickens: 'Fundamentals' driving oil price.


Dallas oilman T. Boone Pickens says "fundamentals" are the reason the spot-market price of oil has fallen recently to $61 per barrel from nearly $79.


"What's happened is you have enough oil now to satisfy everyone's needs," he said. "The demand is dropping off; the economy is slowing down. You don't need as much oil as you needed 30 days ago or 60 days ago, so the price came down. And that's it in a nutshell."


All kidding aside, the 50/50 case for recession is tilting here heavily. In the recession of 2001, oil prices dropped from roughly $40 (inflation adjusted) to around $23, or 42%. In 1990, they dropped from roughly $56 to around $33, or 41%.

So, let's see... $78 - (78 * .41) = $46.

OPEC wanted a floor of $60, they're going to have to pull oil off the market to get that one to stick. That will be interesting to watch.