November 21, 2008
According to the New York Times, oil closed below $50 per barrel on Thursday. The last time oil closed below $50 dollars was in May 2005.
The article also says that some analysts are predicting that oil come go as low as #30 to $40 per barrel.
While this is good news for consumers at the pump, it poses some risks that oil companies will not invest the necessary amounts into developing new resources which could lead to higher oil prices once the economy starts to rebound.
For me it shows how just a small percentage decrease in oil demand can cause a large decline in prices. As the article notes domestic oil consumption is expected to fall by about 1.1 million barrels of oil per day this year, about a 5.4% decline. Most sources attribute the decline to the failing economy but without the contribution of 647,000 barrels per day of ethanol production I don't think we would be seeing as sharp of a decline in oil prices as we have.
That is not to say that ethanol alone can solve our energy problems, but it does show how a combination of biofuels, conservation, and new technologies (imagine a fleet of hybrids powered by E85 or biodiesel) can have a large effect on the price of oil.