Will gas go back down- again?

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Nick R

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So regardless of whatever is supposedly being, or not being done, in washington about gas prices. There is no supply and demand issue here- oil companies are once again, about to post record profits as we see $4 a gallon in the US- and higher in Canada, Europe. But we saw this back in 2008. And then prices crashed down into the $1 range. We went from $4.26 a gallon to $1.85 in about a month, iirc. The question everyone wants to know is- will it happen again?

Not being an economist by any stretch of the imagination, I think it will. What goes up, must come down, right? ......right?
 
If the economy goes into a steep recession, and demand drops, prices will go down (temporarily) as they did in 2008

China is now the #2 oil importer behind the US and growing each year. They are putting 15 million cars on the road every year, and scrapping only a few. Just think, 60 million more cars to feed over the next 4 years alone. Gas prices are like stock prices, they climb a slow steady hill, but over time they always go up.

We need alternative energy (natural gas, electric)to kick in and relive the demand for gasoline as soon as the oil companies have made enough profits, and are ready to share some of their riches...
 
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I think the prices of gasoline that you're considering are short term perturbations in the market. Fundamentally, oil is a limited resource. Demand is not going to go down (in the long run...the economic crash of 2008 severely depressed oil demand, that's why gas went down...) and oil is going to become more expensive to extract.

What do you get with limited supply and increasing demand?

Higher prices...in the long run, over years and years, oil is only going to go higher...and gasoline will too...the only real question is "have we reached peak oil production?" and many belive that we have, meaning that the long term trend is for higher and higher oil prices as the supply declines in the face of high demand.

Your only hope for cheap gas again is another severe recession...and I'll take economic growth over cheap gasoline...

But hey, look at it this way: $200/bbl oil will make alternative sources economically viable...
 
Speculator's drove the price up. They are being investigated.

Back in the days of "cheap gas" the currency standard was the US dollar. The Euro came out and Arabic countries adopted it as they felt it was "safer".

The US dollar is weak now and it's hurting our buying power.

When we get our national debt paid...people back to work...balance trade...and have a strong dollar the price of gas won't fall...our currency will be strong..investors will buy it on the FOREX and gas will be cheap again.
 
Unless I'm mistakene, haven't most of the price increases in the past 2 years been driven mainly by speculation? The oil production lost in libya was a drop in the bucket, but it's risen something like 70 cents here since it started. When I bought my car back in August, it cost me ~$30 to fill it up. I just put $49 in it earlier today! There are record amounts of oil out west in reserve, supply is not the issue.
 
Oil company profit margins (percentages) are a lot lower than many other industries...we went through this discussion in the early 80's...and everyone was outraged at the "windfall profits" of the oil companies...sure, the aggregate $$ are big, because the volume is so big...but so many companies charge us a much higher mark-up over cost that this outrage is mis-directed...

Alternative energy will kick in as oil prices climb...they will become viable where they aren't now...look at it this way...if the government has to pay you to do it (through tax incentives) - it's because it didn't make any sense in the first place...
grin.gif
 
Negative. You'll NEVER see $1 something gas again. I seriously doubt $2 something.

Our dollar is toast. Inflation WILL kill us along with the debt. Add people making too much/doing very little in benefit loaded jobs and its going to be less than a seller future IMO.

My 17 year old is going to collage and will at least get her degree debt free. Student loans will NEVER happen.

Bill
 
I don't think much would change in the OIL price, as they were consumed by everyone and the rest of the world (especially in China, India, Brazil, etc) are consuming a lot more, and are getting richer.

The US consumer has gotten a lot more efficient in the last 5 years and the average fuel economy and age of vehicles are a lot newer, so the "slope" of the demand line is flatter and lowered than before. The supply side may or may not stay the same, as OIL is a lot of politics and a little market economy mixed in. As a whole we would consume less and people would drive less / the same while paying the same amount.

I don't think gas price (per gallon) would drop much more than $1 or so (from $4 at the moment), but I think over time people would drive more efficient stuff and pay less per fill up. It won't drop below $3 unless something crazy happen (i.e. Saudi was invaded and oil declared free world asset, or someone invented a catalyst that convert natural gas to gasoline with 95% efficiency, etc).

$10 a gallon? People would torch their SUV for insurance fraud because they would be upside down on their loan, and 15 year old econo-box would come back alive. Then Algae fuel and natural gas vehicle would start showing up.
 
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Originally Posted By: Silver_civic
Makes me wonder sometimes; could we take old motor oil and make anything useable out of it; possibly kerosene, diesel, gasoline or..... I am just wondering




If you have an old diesel, you can drop in a quart or so per tank and burn it.
 
Folks don't realize just how sensitive the market is to supply changes...it's a tight market...small percentage changes in production lead to large changes in prices...and the "speculation" is just that - people trying to guess the future and trying to share the risk through financial markets. Southwest Airlines, for example, made over $900 million in 2006 by buying oil futures the previous couple of years (they lost money flying airplanes...but that's another story...). The airline industry gets crushed by jet fuel price fluctuation (United Airlines buys about a couple billion gallons of jet fuel a year...move that price a few pennies a gallon, and you're making a real difference in the bottom line) so they "hedge" or share the risk or "speculate" by buying future oil production...so that if the price goes up, they can sell those contracts at a profit to offset the losses from running the airline. It's basic business...and lots of businesses and industries do it...

But that hedging is not the only factor that affects the prices... For example, close the Suez canal (that was the real concern in global markets...not Libya's production). Now, every supertanker will take twice as long to get to market...

So what? We have to wait a few more weeks to get our oil? no...actually, because the round trip now takes 8 weeks instead of 4, we lost half of our transport capacity, it's as if we have half the number of ships because each ship can only deliver half as much per month...and the 11 million bbls the US imports daily drops to 5.5...

The concern of that possibility as Egypt rioted caused lots of responsible businesses to "hedge" or "speculate" by buying futures...

It's just not so simple as "evil speculators"...there are real reasons to speculate...
 
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Originally Posted By: Pete591
Speculator's drove the price up. They are being investigated.


When we get our national debt paid...people back to work...balance trade...and have a strong dollar the price of gas won't fall...our currency will be strong..investors will buy it on the FOREX and gas will be cheap again.



Nice dream
 
Our main problem right now is a tight supply of our own refined oil. the oil CO's have kept supply low this year thus driving the market skyward along with middle east unrest and speculation it makes for a serious problem. When people start slowing down their travel again (demand) prices will come down, just as in 2008.
 
Nick - you sure struck a nerve!

Bottom line: I think we've reached peak oil and the expansion of other developing economies, notably, China and India, will continue to keep demand high. Short term ups and downs will happen due to political and economic forces, but the days of cheap gas are forever gone...IMHO...
 
I think we have been physiologically conditioned to accept higher prices. Who ever thought they would be happy to see $3.00 per gallon? So, NO, we will never gas where it should be, in the $1.00 range.
Since there is no supply issues, policy/weakened dollar has as much to do with the current price of all commodities, including oil, as does speculation.
 
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Cheaper would mean a great increase in supply...but it takes years to explore, develop and extract oil from any source...and exploration now won't yield results for several years, by which time demand will have increased as well...

I remember the early 80's - when gas hit about $1.45/gallon at my local station and I just got my first car - a 1977 Olds 98...not the most frugal car on the road...

Adjusted for inflation, that would be the same as about $3.50 today. So, gas, adjusted for inflation, is pretty much where it was then...I don't think we're going to see cheaper...it is costing the average US household about as much now as it was then...even though our cars, on average, get much better mileage...
 
Yes it will. If the fundamentals are going to make gas go up 10% everyone is going to want to beat that or profit on it, to a degree where they'll overdo the speculation and it'll come crashing back.

I think, just a WAG, that gas "wants" to be around $3.25-3.50 and it'll figure out a way to get there.

Gas prices pull emotional heartstrings so investors make irrational decisions. Doomsday scenarios sell lots of gold and bullets too.
 
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