Crude Slightly Lower
Nov 19th, 2008 | By Doug Casey | Category: Financial NewsIn the energy market Tuesday, oil touched a 22-month low at $53.96 but then edged higher, with crude for December delivery closing at $54.39/barrel, down 56 cents. Gasoline for December delivery dropped 3.8 cents, to $1.1386/gallon.
The average U.S. price for gallon of regular gasoline at the pump now stands at $2.068, according to AAA’s Daily Fuel Gauge Report, down more than $1 from the year-ago level of $3.095.
Crude’s precipitous fall is having an effect in the field, says Charles Perry, president of Perry Management, who says that, “With the decrease in oil prices … we are now seeing a drop in active drilling rigs, and some are being stacked … Truth is, several of the drilling prospects are no longer economical, and plans to drill them have been shelved. Same is true in the gas producing areas.”
Perry added that, “When an oil company leases a drilling block, the usual terms are a ‘bonus’ paid up front in cash, and pay the land owner from 12.5% to 25% of the gross income (commonly called royalty).” He said that lease bonuses were running $25,000 per acre in the Fort Worth Basin 2 months ago, but are now only $5,000 to $7,000 per acre, and drilling has dropped significantly.
And world oil producers and users are going to have to decide how to deal with Somali pirates who, in their boldest move yet, seized a Saudi supertanker carrying $100 million worth of crude. Tankers may be forced to carry heavy armaments in the future.
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.