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...fall? People have been anxiously wondering as they watch the plunging stock market. But increasingly the same question is being asked about another crucial figure: the price of oil. It has plummeted nearly 40% in just three months, from about $147 a barrel in July to below $83 on Friday, with no obvious bottom in sight. If that sounds good, you are probably a driver who winces these days at filling your gas tank. But the downward spiral could mean trouble for oil-rich countries and for the environment...
...analysts admit that most of them failed to predict how fast oil prices would drop. Just a few months ago, some were saying oil might reach $200 a barrel by year's end. "The analysts have been quite surprised by the pace and volatility of the decline," says David Fyfe, senior oil analyst for the International Energy Agency in Paris, which as a rule does not predict oil prices. "The volatility has been quite marked...
This year's sky-high oil prices are partly responsible for the drop. Since oil hit $100 a barrel for the first time early this year, Americans (who consume one-quarter of the world's energy) began cutting back. When gas began selling above $4 a gallon, American consumers made "a psychological shift into the sense of crisis and a sense of permanence," says Greg Priddy, oil analyst for the Eurasia Group in Washington. Instead of believing that gas prices would finally fall again, many began changing their daily habits - they started driving the smaller...
...still haunted by a disastrous error made at an Opec meeting in Jakarta in 1999, when the cartel - which produces more than a third of the world's oil - opted to raise its production levels. Within weeks Asian stock markets tumbled, driving world oil prices down to $11 a barrel. Oil officials in Saudi Arabia and elsewhere have cited that price crash as the reason they've rebuffed pleas from President Bush to pump more oil. Says Benali: "Countries have learned the lessons of the past...
...some countries there is a fear far greater than an economic recession: political turmoil. Iran, which earns 80% of its revenues from oil exports, set this year's budget on the assumption that oil would trade at $90 a barrel - a figure which seemed conservatively low until recently, but which is now above the world price. "If the price stays there a while Iran would cut spending," Priddy says. That might include cutting heavy gas subsidies for Iranian drivers, who have rioted in the past when the government tried to ration gas or raise the price at the pump. Hugo...