What are some of your thoughts on where gas prices will settle? I was watching a news program this weekend, and an analyst was saying that most of these increases are because of oil speculation on Wall Street. He believed that oil should be at $80 per barrel when the speculation dies down.
Are we stuck with $4 per gallon for the foreseeable future, or will gas come back to reasonable prices again? I’m not holding out for the $1.10/gal prices we saw 7 or 8 years ago even, but could we see $3/gal again? Two?
The price may find temporary resting places or even drop slightly for short periods, but in the long-run only increase until viable alternatives become economical. Or until demand drops significantly, which is unlikely.
There is a fundamental limit as to how high the prices can go. Short-term, it can go to whatever price the market sets, but long-term it will cease to be a viable alternative. When that happens we’ll do something else (though what that will be nobody can say). You’ll pay $100 a gallon tomorrow if you have no choice, but shortly thereafter you’ll figure out a way around it, and the market will implode.
The market will top off at the highest price that it can demand without destroying viability of oil as an energy source. The traders don’t want to get stuck with contracts to buy something they can’t sell, so it’s self-correcting. Who’s to say what that price is, though. Is it $10 per gallon? $15? Who knows? In any event, it will likely never again be $2 a gallon ever again.
sorry just to add (lack of edit is a pain in the behind!) -
it’s unlikely demand can or will drop significantly fast enough. I think $300 a barrel by 2010 is more likely, and by then most economies will be pretty far down the toilet. Americans have been too slow to respond to the idea of peak oil, word was out years ago and it was shot down as doomsayer fluff not worth any serious thought, and the longer lifestyle changes (and there is no doubt that current private transport needs to be re-thought) are delayed, the harder and more expensive it will become to make them.
Expect SUV re-sale value to begin a magnificent dive soon…
I think it is likely that crude oil prices settle back down to less than $100/bbl. I would be surprised if we saw any big decrease in gasoline prices though. Considering refineries are, in many cases, losing money at the current crude / gasoline price market, it seems like an increase in gasoline prices as compared to crude is likely. Historical crack spreads have been more in the $20 - 30 range and are now less than $10 for many refineries. My opinion is that you’ll see gasoline at $5 a gallon before you see if at less than $3.