SUGAR LAND, TX--(MARKET WIRE)--Jan 14, 2009 -- Researched by Industrial Info Resources (Sugar Land, Texas) -- Looking back over the last few months, the price of crude oil has plummeted from an all-time high to what is now almost a three-year low in just a few months. The price of natural gas has also dropped significantly during the same time period and is hovering at a low during a time of year that typically brings a positive price swing. Many industry and investment leaders previously boasted of $150 to $200 oil. One has to ask, what happened? The answer is simple: it was absolute demand destruction. Economies simply cannot function when energy prices are raised this quickly. If one looks at the scenario from a global standpoint, about two years ago people speculated that $70 crude oil was the economic breaker. When crude crossed that level, the price drop brought economic shocks that sent it back down below $70 to hover in the $45-$55 range right before it blew past that barrier and crossed the economically crippling price of $100.

Source: Industrial Info Resources
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At this point, prices of everything from basic food to commodities rose across the board. Many think of only the fuel cost to bring food from the farm to market, but it goes much further than this. Just about everything one can think of will rise in price. Energy prices related to transportation, mining, electrical generation, and chemical feedstocks rose. The costs of bringing new supplies to market rose as well, related to both the price of steel and equipment as well as engineering and construction costs that were rolled up into new projects. Prices of these commodities passed our ability to put facilities into place that could keep pace with demand. Very little exploration and development of hydrocarbons took place in the late 1990s and early 2000s, and real development did not begin until the price passed $40 per barrel. When natural gas was near $2 per thousand cubic feet, there was almost no development. In essence, when prices rose so quickly, population and markets were unable to keep pace.

The results were only natural. Governments, companies, and people began to change their spending habits. People drove less. The governments of Chile, China and India began to cut their crude-oil subsidies to their populations, further spreading the pricing pain. Finally when the markets themselves began to falter, investment houses and traders began to flee stocks, securities and even currencies, moving into commodities such as crude oil to find a safe place. In reality, however, this simply drove the price of crude oil up until it crossed $140, and the global economy suffered as a result.

Today, we find ourselves back at $35-$45 crude oil and relatively cheap natural gas. Coupled with this new low price atmosphere, many questions regarding the oil and gas industry as a whole are now surfacing. How long will energy prices remain at these levels? What could keep the price from rising? How long will these issues persist? What have been the effects of this sudden price fall coupled with the current credit crisis on the oil and gas majors like Exxon Mobil (NYSE:XOM - News), the mid-level players like DCP Midstream Partners (NYSE:DPM - News) and the smaller market players? What actions are these companies taking to adapt to this new pricing atmosphere, and what will be the resulting impact on their spending? Finally, what long-run scenarios could effectively reverse this downward trend?

Listen to today's "Navigating the Currents of Change" webcast for the answers to these and others questions currently swirling around the oil and gas production marketplace.

Industrial Info Resources (IIR) provides marketing communication services ranging from industrial database solutions to market forecasting, custom analytics, and specialty promotions that support high-level image campaigns. For more information send inquiries to oil&gasproductiongroup@industrialinfo.com or visit our website at www.industrialinfo.com.

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