Late in July/Aug timeframe I sent a daily update to my customers on the then current energy market which had come off it's highs of the summer. Remember 147 oil and natural gas at 14 per million BTU. There were signs of finacial meltdown not of the magnitude we now see but with a select few who were clearly and heavily upside down on their finacial positions. The economy also showed some low luster as well. I indicated at that time energy pricing likely had some more downside and oil below 100 looked likely and 90, I'd have to look back at my charts but crude was generally in the 120ish range. I also said natural gas would go below 10 bucks and 8 would be a reasonable hedge for the winter. The hangman I put on this was the economy. I said something to the effect that a further slowdown in the economy would put crude below 90 and natural gas in the 7/mmbtu range. That, at the time I thought would be a steal relative to natural gas cost. I indcated also that a total meltdown of the economy would see crude in the 50 range and natural gas in the 5/mmbtu range. Well holy cow, total meltdown of the economy, customers are closing plants, I call to talk to a Controller or Purchasing Manager and within a week of talking to them last they have been laid off and it just seems to be getting worse and worse out there. On to the good news, relative to oil............ Charting of crude oil for this week appears likely to support a close below 49/bbl, well below in fact. Current pricing is 44. Technical analysis points to 30/bbl crude next week, all things being equal and no solid support for pricing until 25 freaking dollars per barrel. 25 bucks................ That is simply amazing, unreal and I might add a good futures position to take??????? Speculation aside, or speculation upfront, shows a lot of buyers of crude oil on the speculative side of the business. NOT speculative with paper money but speculative with physical product. Players are literally buying crude product, leasing 2 million barrel tankers and floating them at sea as storage. Hmmmmmm....good or bad idea.....only time will tell. Natural gas tonight had slipped solid under 6/mmbtu and trading $5.88. Utility customers won't see the total benefit as utilities have stored much of their winter supply underground with summertime priced gas, well over $10.00/mmbtu average cost. I hedged a lot of customers 50% this past August in the $8.00 range with the remaining volumes left to purchase off the spot market, in other words at current pricing. Will seriously consider hedging more gas for these customers over the coming week(s) long term. We are getting to and past in many cases, price levels that are well, well below replacement cost. Oil and gas wells go dry, production declines without drilling for more. Drilling is slowing down and will likely slow down very hard over the coming months. Can't drill at $80 per barrel cost and expect to make it up on volume with $40 or $30 crude pricing. Same with natural gas costs. On top of that credit is almost non-existant for the smaller players. So even if they did want to drill, they could not get the cash to do so. There is a picture buried in all this. The cure for low prices is low prices and the cure for high prices is high prices. Econ 101 AGAIN proves correct on the later and will prove correct on the former. Short term, we could see gas pricing close to a $1.00 in some locations IF crude slides into the $20's AND demand does not creep up. Gasoline did show a slight increase in consumption in this past week's inventory report but 1 week does not make a trend. That data point though did get noticed in the market. The economy though is driving the energy market and from the bright side of things every report (Friday's job report won't likely do the market any favors) that shows a worse economy will take energy pricing down with it. Even high consumers like Japan are cutting way back on crude imports. OPEC will act at their mid month meeting and cut supply, no doubt about it. The question though is can OPEC stick with the cuts or will low pricing cause OPEC partners to overproduce just to get cashflow. How will these low prices affect Venz., and Iran? they need cashflow and soon the natives will get angry. China is loaded with cash so they won't feel too much pain I suspect. If we can keep consumption in check we will see some seriously cheap gasoline costs. It would be amazing if we went from $4.00+ in Summer 08 to $0.99 in Jan 09. Nothing else compares to that. Totally crazy.