Out goes the expensive oil, in comes the cheap . . . hopefully. The world's oil companies are draining their tanks to near empty. Many expect a sharp drop in crude oil prices on the world market. Traders plan to cash in big if oil prices tumble from their current $30-plus a barrel to perhaps as low as $20. Ironically, the expectation of lower prices helps prices fall in the near term because demand drops as traders postpone purchases. And when demand drops, even OPEC has to respond, first by cutting production, then by discounting prices. One price cut leads to another. Soviet price cuts have followed Nigerian and Iranian discounts. The likely next step: a cut in Britain's North Sea oil prices.
Warning: Even if oil prices continue to fall - particularly if they drop below $25 a barrel - don't count on cheaper gasoline. Instead, expect Uncle Sam to step in with a tariff on imported oil to soak up the savings.m