Put crudely, petrol panic runs out of puff

TWO months ago, Australia was being told to brace for petrol prices of $2 a litre.
Israel was pummelling southern Lebanon, US motorists were draining fuel reserves, and oil traders were talking up the real chance a barrel of oil would soon be worth $US100.
What a difference a few months can make.
Oil prices are on a five-week losing streak courtesy of a milder Mother Nature and a dose of diplomacy in the Middle East.
After slipping effortlessly to a record $US78.40 a barrel in July, the price for a barrel of crude is now 20 per cent cheaper after its first four-week slide in prices in seven months.
During the chaos of record prices, Goldman Sachs warned that the world could soon be paying $US100 a barrel for oil, translating to $2 a litre at the pump for Australian motorists.
The doomsday scenarios of Peak Oil theory - that we have already found most of the oil available and are rapidly running out - gained fevered currency. That interest has since subsided and the theory itself has been dismissed by oil companies. "Peak oil predictions are not new," ExxonMobil Australia chairman Mark Nolan said at the Asia Pacific Oil & Gas Conference last week. "They have been occurring, particularly at times of high prices, regularly since the 1920s."
Analysts now are not so sure fresh record prices will be reached. National Australia Bank energy economist Gerard Burg said $US60 a barrel was the floor.
"I can't see a fall much lower than that any time soon," Mr Burg said. "Our forecast for 2010 is for oil prices around $US55 a barrel, but we are not going to see oil prices go back to $US20 a barrel, that's a thing of the past."
Petrol prices in Sydney this week dropped to $1.12 a litre at some outlets. With discount dockets, some motorists were paying $1.08 a litre. That may give the Reserve Bank of Australia the reason needed to keep interest rates on hold for the rest of the year.
"With the 1.5 per cent boost to inflation in Australia for the year to the June quarter from petrol prices and bananas likely to reverse, it is looking very likely that headline inflation will fall back to 3 per cent or below by early next year," said AMP Capital Investors chief economist Shane Oliver.
Growth in the US has slowed for the second consecutive quarter while stockpiles of crude oil are up 5 per cent this year.
But the oil market remains just one hurricane away from a return to record oil prices. As do Australian petrol prices.
Seasonally, this is a tricky period for oil. The Atlantic hurricane season runs June to November and into the northern hemisphere winter when demand rockets for heating oil.
So far the season has been benign after the disaster of 2005, the most active hurricane season on record, when Rita and Katrina cruelled US refining capacity.
But the forces behind that could also be the force behind a warmer northern hemisphere winter which would be further good news for oil supplies. "With El Nino we may not see a cold winter in the US," said CommSec economist Craig James.
"It is very much a good news situation for oil at the moment," he said. "There is an oversupply of oil in Asia at the moment and refiner margins have become negative. They are paying more for their oil than what they can get for their refined products.
"But it is going to be very hard to see petrol prices below $1 a litre. Oil prices would have to get to the mid-$US50s for that to happen. At $US60-$US65 a barrel it is both a fair price for consumers and producers."
NRMA president Alan Evans said the falling oil price was partly due to the US Government releasing millions of barrels of oil from its own stockpile into the open market. It is purely a policy to appease disgruntled American motorists, he argues: once the Congressional elections are over later this year, voters would take a back seat and back up will go the oil price.
"Petrol prices will go back up after November," Mr Evans said.
It's an outlook shared by the International Monetary Fund, though for different reasons. While oil remaining at current levels would allow the IMF to upgrade their forecast of world economic growth by 0.02 per cent, the organisation expects oil prices to reverse much of the 20 per cent loss in 2007.
"The market is still pretty vulnerable to unanticipated supply shocks," said Tim Callen, division chief of the IMF's world economic studies division.
"With spare capacity remaining at very low levels, supply concerns have played a growing role in pushing up oil prices."
The wildcard in the pack is how long the Organisation of Petroleum Exporting Countries can put up with the falling prices.
The cartel, which accounts for 40 per cent of global production, licked its lips as the oil price went up.
OPEC has committed, for the time being, to keep daily production levels at 28 million barrels of oil a day.
Deutsche Bank's director of Australian energy and utilities research, John Hirjee, said OPEC would start defending its supply at $US55 to $US60 a barrel. "We do have an average price of $US62 a barrel for next year and a moderation after that as more supply comes on," he said.
According to ExxonMobil, demand for oil will double by 2030 and there could be 3 trillion barrels of oil yet to be produced.
"We in the industry know that the world is not in danger of running out of oil any time soon," said ExxonMobil Australia's Mr Nolan. "It is also important to note that as an industry and as a society we have always underestimated the global resource base and the ability to extend both the life of oil and gas fields, and to find new resources."