Pump prices headed toward five-year lows nationally and in California, the Energy Department said Monday. And despite a bump in crude prices, some analysts say the slide might not end until oil hits $25 a barrel and gasoline drops to $1 a gallon or below.
The hope for some good news from President-elect Barack Obama's economic stimulus package and production-cut hints from the Organization of the Petroleum Exporting Countries were enough to keep crude above $40 for at least another day, analysts said.
Crude oil for January delivery climbed $2.90 to $43.71 a barrel Monday on the New York Mercantile Exchange. But some experts didn't see much momentum behind the increase because of expectations of a bleak jobs picture for January and weaker demand for oil.
"The world has changed. I don't see any reason why $1 gasoline isn't possible, and $25-a-barrel oil is not out of the question," said Phil Flynn, vice president and senior market analyst for the Alaron Trading Corp. in Chicago. "I don't think the downside is over. There is a lot of surplus oil out there."
But Fadel Gheit, senior energy analyst for Oppenheimer and Co., is one of the analysts saying that oil won't stay down, even if the historic price drop isn't quite over yet.
"Some of the same clowns who were predicting $200-a-barrel oil a few months ago are in the crowd predicting $25 a barrel. But just as we believed that oil above $100 was not sustainable by market fundamentals, oil below $30 isn't sustainable either," Gheit said.
"Even in the midst of this global recession, the world is still using 80 million barrels of oil a day. If production is cut back sharply and the oil companies keep reining in capital spending, it will come back to haunt us," Gheit added, saying that the global economy would eventually improve and place greater demands on supplies.
Oil's relative weakness -- down from highs above $145 a barrel in July -- continued to drive the price of a gallon of gasoline down at an astounding rate.
Nationally, the average price of self-serve regular gasoline fell 11.2 cents to $1.699 a gallon. That was $1.30 below the year-earlier price and was the lowest average since the $1.688 the Energy Department recorded on Feb. 23, 2004.
In California, the average fell to $1.805, down 15 cents during the past week. It was $1.52 lower than at this time last year and was the lowest recorded since the average stood at $1.753 on Feb. 2, 2004.
