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Sunday, July 20, 2008

Has the global oil bubble burst? Not yet

New York: The price of oil recorded its biggest weekly drop ever, and a gallon of gas finally pulled back from its record high. So is it time to declare the energy bubble popped?
    Experts won't go that far just yet.
    "It's too early to say we've seen the worst of it,'' said Tom Kloza, publisher and chief oil analyst of the Oil Price Information Service in Wall, New Jersey. "We would be Pollyannish if we believe one week represents a trend.'' Still, with oil recording yet another drop on Friday, some industry experts who just days ago thought there was more juice left in oil's meteoric run are reconsidering.
    "If this is not the bubble's implosion, than it's a reasonable facsimile," analyst and trader Stephen Schork said in his daily market commentary. "Time will tell. Neverthe
less, for the time being we no longer care to hold a bullish view.''
    Light, sweet crude for August delivery fell 41 cents Friday to settle at $128.88 on the New York Mercantile Exchange—well below its trading record of over $147 a week earlier.
    The average price of a gallon of regular gas fell about a penny for the day, to $4.105, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel prices dipped three-tenths of a cent to $4.842 a gallon. Some analysts said a nationwide (US) average of $4 or even lower could be in the offing—almost unthinkable in a summer when there has seemed to be no relief at the pump—although they cautioned that there is no guarantee prices will stay low. "We're going to see some relief from that relentless march higher,'' Kloza
said. Gas may be getting just a bit cheaper, but major changes in how Americans live and drive are already in motion.
    Car buyers have been fleeing to more fuel-efficient models. US sales of pickups and sport utility vehicles are down nearly 18% this year through June, while sales of small
cars are up over 10%. While slashing production of more-profitable trucks and SUVs, automakers have been scurrying to build their most fuel-efficient models faster.
    Toyota Motor Corp, which hasn't been able to keep up with demand for its 46-miles-per-gallon Prius hybrid, said last week it will start producing the Prius in the US and suspend truck and SUV production to meet changing consumer demands.
    Ford Motor Co and General Motors Corp also have announced plans to increase small car production, and GM has said 18 of the 19 vehicles it is launching between now and 2010 are cars or crossovers. Some brave traders used the week's pullback in oil prices as a chance to buy barrels that suddenly seemed to be on sale. But oil analysts were advising investors to beware. AP



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