The Gas Price Limbo: How Low Can it Go?
by Eric Leech, New York, NY 
on 12. 7.08
Photo credit to Tim Patterson
What a ride it has been folks... The price of gas in the U.S. was teetering on the $4 mark just a short few months ago, and here some states stand today with $1.90... $1.70... $1.60... dare we say soon to be $1.50. We are making history right now with gas prices having plummeted over half its original value in just the last six months. You'd think folks would be happy, which many of them are, but gas is not quite selling like hotcakes, even at these outrageous prices.
This is because there is another force at work. Many experts are telling us that the good news at the pumps is unfortunately due to some pretty bad news on Wall Street. Among other reasons, much of the amazing drop in gas prices is that old factor of supply and demand. People are staying home more these days, finding their own brand of entertainment, and saving their money for what could become quite a steady length of rainy days.
Currently as things stand, consumers have been driving approximately 78 billion less miles over the past 10 months than what was expected. That certainly creates quite a surplus that we did not expect. To go along with the surplus, the price of crude oil is now under $100 a barrel, which makes the playground for speculators not as fun for gambling as it was several months ago.
While this is actually good news for the earth, as she can at least breathe a little easier, it is bad news for much of the world's economy, which is going South faster than most of the ducks around this time of year.
Also faltering under supply and demand right now is E85, which is just sitting in inventory tanks. The price of regular gas and diesel has made a lot of folks forget about E-85. Some people are even forgetting about what the price of gas was several months ago and have fallen right back into their old cozy surroundings of $20-something for a tank full of gas.
Each month we reach a new low in the price of gas we thought we'd never see again, which brings the question on everyone's mind, how low will it actually go before leveling off, or skyrocketing back up? Well, some people seriously doubt that we will ever see $1.10 gas again, but $1.50 or maybe $1.40 is certainly possible.
Other folks say we could be seeing less than $1.00 in a matter of time. How low gas prices will go is actually a tricky question, as much of it depends on where the current recession will go from here.
Hard times will mean less driving and subsequently cheaper gas. If the economy begins to loosen up a little and allow some money to once again start flowing through, consumers will start driving more, and we can kiss the possibility of less than $1.00 gas goodbye. With these kinds of options it makes gas prices a double edged sword. Gas is currently inexpensive and the air is slightly cleaner because the consumer is suffering, which is both good and bad for obvious reasons.
What do you all think about the current gas situation, and where do you think we will find ourselves within the next six months?
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I live in Oklahoma where gas has actually plummetted to $1.45 per gallon.
How much of the drop is due to the speculators who kept artificially bidding up the price to see how high it could go? The demand has been falling, but how does a 10% drop in consumption equal a 50% drop in price.
There are other factors at work, other than just demand. I think we called their bluff.
Now is a good time for legislators to introduce a price floor in the form a fuel tax to fund Obama's infrastructure improvement plan and get Americans working. This price floor will also protect companies that have made an investment in alternative energy from going under.
Now is also a good time for legislators to introduce the windfall profit tax on Big Oil/Energy companies.
There needs to be a movement to impose a $1 per gallon gas tax, and use the proceeds to fund Obama's infrastructure job creation initiative. With this type of financing we can support a green energy industry, rebuild our infrastructure and economy, and protect our national security. By reducing our purchase of oil, we begin to cut our ties to the countries we subsidize; the very ones, like Venezuela, Iran, and Russia, who threaten our safety.
it's about $1.50 to $1.40 here in Colorado.
It's not six months that matters - with the low prices oil this week companies are canceling all their projects that will take 6 years to get online. This is about when the worst "Peak Oil" downslope is expected by the 'late peak' people. Not a great way to forecast, Hmmm?
I was driving down I-44 thru Sullivan, MO and spied a price of $1.35/gallon about a week ago. Gas prices are up a little since, with the predominant price in my corner of the US around $1.57/gal.
As an indebted, low-pay consumer with a non-hybrid car, a part of me longs to see gas below $1/gal, but I'd have to eat crow if it goes that low. Also, I worry that the push to create more abundant green sources of energy and more abundant consumer options to utilize said energy will get buried under an avalanche of neo-cons screaming "Economy Now! Economy Only! ECONOMY! ECONOMY! ECONOMY!!!" with no concern other than the old, outdated, vertical-oriented business models be preserved rather than moving toward the newer and more successful, horizontally-aligned business models that are more efficient at producing and more conducive to promoting the new green technologies that said neocons will clamor for when the global recession ends. But maybe I'm the only one that worries about that :ol
If it can go down that fast it can certainly go up that fast again. The first sign of a resurgance in gas consumption will send the speculators into yet another feeding frenzy.
Be a good time to go looking for deals on fuel efficient cars...
In the honest opinion of this 16 year old non-driver, who holds little accord towards the human race, what we do to ourselves in our own greed, is a problem we must face. Gas prices are plummeting due to the greed of fellow man. They wanted more money for their liquid gold, and they got it, up until the buyers started paying attention to the world around them. It will go up again, I doubt that not, but when and why is simple guess work. Just like the weatherman on tv tells you the forecast for tomorrow, there is no way to know for sure. Weather changes, as does the ideals of man. Excluding greed. In the same analogy, were one to live in, say, Cuba, and it were Summer, the temperature would not drop below zero, for sure, but global warming might make it cooler than usual. Same as with men. They'll ask for less, but they'll still take what they can squeeze for their greed. Many blame corporate fat cats for the greed in this world, gas specifically, but everyone must remember; those jerks in office are only there because we put them there. Well, you did. Me, I sat back and watched as you readied the destruction of the world for the hands of me and my peers. And when the time comes, I'll stand back and watch as the world crumbles at our feet. No matter how hard you try, as long man is greedy, that is as long as the world will be in peril from it's greatest calamity of a creation. Even in the ancient times, the times of Magick and Magickal creatures, man was the greediest of all. This debate is useless. Whether current prices rise or plummet is completely up to us, and us alone. Honestly, I hope it plummets, and destroys the economy. It will leave a hell of a mess for the next few generations, but at least it will give the next generation after me, a smarter generation, perhaps, a fresh start.
To William Edwards and all others scapegoating “speculator”:
Can a 10% drop in consumption create a 50% drop in price? Of course! Any economist can tell you that prices settle at the point at which supply equals demand. That is by no means a linear relationship. In the case of petrol the price will rise until it begins to *reduce demand* due to prohibitive price, at which point a stable equilibrium is reached, assuming no change in supply and demand.
What happened recently with oil prices had nothing to do with “speculators”. There was an extended period earlier this year when global oil demand *exceeded* global supply. Let that sink in a moment then ponder that almost all oil producing countries were at peak production capacity as well (Saudi Arabia was the major exception).
When you’re in a situation where demand exceeds supply prices can skyrocket. Again, this is due to the fact that prices will rise until they reduce demand to the limit of supply. Organizations that require significant fuel usage - lets take airlines for example – buy large volumes of *future supply* at fixed prices to have known expenses and reliable access. This is the fearsome “speculator”. Instead of somehow magically having the ability to raise gas prices (and if the could, why wouldn’t they do it all the time?) they are simply reflecting what supply and demand will be like *in the future* based on current projections. And again, when you’re in a situation where demand exceeds supply the prices is only limited by its ability to reduce demand. “Speculators” were not a cause of high gas prices, they were the vanguard of the market. In general, speculator inflated pricing can only occur when speculators can “corner the market” and control the supply through pricing. OPEC could do it by limiting supply as they have in the past, but they had the faucets fully open. The problem this time was on the demand side.
The only people that seem to falsely place blame on speculators tend to be those whose world view would be undermined by the idea of global forces out of their control. Anyone pushing speculation as a cause is either intentionally trying to manipulate you, or they themselves have been manipulated by another.
What I think is going to happen, isn't that people are going to charge out and start buying SUVs again. The fact is that at the moment people aren't buying any cars at all.
They will however, keep the fuel efficient cars they just bought en masse and be thankful for the extra-low gas bills while they try to pay down their credit cards to free up some credit, and maybe even get back into the black until banks start lending money again.
So two things are happening: more people have cars that use less gas, and they're buying even less gas because they're not driving as much.
Now, when people start being more prosperous once more, we might have educated them enough to spend their future money on efficiency rather than on bling, but don't count on it. We treehuggers should be using this time to demonstrate how people can be comfortable *and* use less at the same time. If we show people now that while they're cutting their power bills by shivering in the dark, we already cut them with technologies that use less back when we had money, then I think they'll be more interested in those technologies in the future.
The same thing applies to cars. Those of us with Priuses benefit from low gas prices just as much as those with pickup trucks.
Maybe it's because of President's Bush call for offshore drilling that made the difference. Support for offshore drilling also comes from President-Elect Obama.
America is in a desperate need to be energy independent.
I believe strongly that a $1 rise in gas tax is needed. Otherwise as soon as consumers start buying gas again, the price of gas will skyrocket right back up again. Addin $1 to the price of gas will help (but not permanently) stabalize the gasoline market and make us better consumers for it. Not only that as other have mentioned the added gas tax can help pay for infrastructure improvements and maybe this time the money can be split evenly between highways and transit.
I live in Wisconsin And gas is averaging $173.8
Why is it such a bad thing that oil production is being cut? To me that is a good thing. Its an achievement on our part to better our environment. We dont have an infinite supply of oil it WILL run out one day. All it is is these big oil companies arent making the money they were making a few months back and they are crying because they arent selling massive quantities of oil and over pricing it and gaining a huge profit. So, now they are going to MAKE a shortage and over price AGAIN.