Energy Prices Fall, But Market Remains Uncertain

The world market price of oil has fallen by over $30 a barrel in recent
weeks. It has given consumers a break on gasoline prices and provided
relief for the airline industry, farmers, manufacturers and transport
companies. Even the Russian invasion of neighboring Georgia and a
tropical storm in the Gulf of Mexico have not caused a significant
reversal in the downward trend. But, as VOA's Greg Flakus reports from
Houston, analysts say there is no way of predicting how long the lower
prices will last.

Energy analysts here in Houston do not expect
big price hikes in the immediate short term. But they say the days of
abundant and cheap energy are probably gone. David Pursell of the
energy investment firm Tudor, Pickering, Holt and Company, says prices
in the months ahead are likely to fluctuate up and down, in a broad
range.

"That is unfortunate for consumers, but it is also
unfortunate for companies in the business. Certainty is a good thing,
because if I know where prices are going to go and I am an oil and gas
company, then I can have more confidence in my long-term investment
decisions. Volatility can be somewhat paralyzing," he said.

Pursell
says the Organization of Petroleum Exporting Countries, known as OPEC,
can cut production to keep prices from falling below a determined
level. But he adds, OPEC has little or no control over how high prices
can go.

He says the drop-off in prices now is partly the result
of falling consumer demand, in reaction to high energy prices, as well
as the strengthening of the dollar.

Some commentators have
suggested the recent oil price decline was caused by President Bush and
other political leaders pushing for more drilling off US coasts. Such a
move could increase the supply of oil in coming years.

Others say that threats by Congress to rein in so-called speculators who had driven up prices, helped reduce energy costs.

Analyst
David Pursell has a different view of what politicians deride as
speculation.  He says it is a vital part of the market, in which
experts try to lock in prices advantageous to their companies. He says
even using the term speculator diminishes the role these investors play.

"It
is not very descriptive. It is like calling a dog a non-cat. It may be
accurate, but it is not very meaningful. These are professional
investors. Speculator makes it sound like a bunch of guys going to a
roulette wheel in Las Vegas and putting their money on oil," he said.

He
says the investors who buy and sell futures had put money into oil,
gas, gold, agricultural crops and other commodities because they wanted
to own hard assets while the dollar was falling in value. Now, Pursell
says, things have changed. "What has happened since then is the dollar
is strengthening and you are reversing that money flow. What is
interesting is that you do not hear a lot of complaints out of
Washington about speculators driving the price down," he said.

David
Pursell says a drop in oil prices to the $100-a-barrel level could
result in consumers going back to their old habits, driving
gas-guzzling cars and generally not worrying about energy costs. He
says this is what happened in the early 1980's when energy prices fell
dramatically and many conservation programs fell by the wayside. On the
other hand, he says, continued volatility in the energy market could
keep consumers focused on energy costs and encourage people to drive
less and conserve more.