Mike Beversluis

Saturday, November 15, 2008

The bottom comes rushing towards me


Oil and gasoline prices are falling rapidly, which makes me wonder where they'll stop - gas is currently $1.60-$2.40. I'm curious about the overall trend in that plot - gas prices seem to decline linearly around 13 cents per decade. If the price spike we saw this last year follows the same pattern as the OPEC oil shock, then it looks like $1.30 average will occur in 2010. Given the national spread in prices of ~80 cents, I think we'll see gas prices under $1 somewhere in the US sometime in the next year. Remarkable.

I wonder if all of that crazy high-rise construction in Dubai is going to make for the most depressing boom-town ever? Well, yes, it is.

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7 Comments:

  • Dubai will just get bailed out by Abu Dhabi. It's long-term future is good ; it's emerged as the number-one bolthole for the economic elite across southwest Asia.

    By Blogger Ali, at 16 November, 2008 16:15  

  • So here is for the prediction game: the beauty is that now we have an electronic record. In my opinion the price of gas will go up again and the current decline is temporary. Let me try to be more precise: it will stay approximately constant during the next 2 or 3 years and then it will start a slow increase.

    By Blogger John Travolta Sardus, at 16 November, 2008 19:14  

  • So, with the average price of $2.12 now, you'd bet that it will be greater than $2 for the next two years?

    By Blogger Mike Beversluis, at 16 November, 2008 21:50  

  • Ok, let me try to be ... wrong. In my opinion it will reach a minimum of about $2, but not lower. I cannot be so confident in such a precise prediction, but what I feel more confident in is that it will not go to $1.25 - I feel that in that case demand would drive it quickly up.

    By Blogger John Travolta Sardus, at 17 November, 2008 07:49  

  • I think John is right.

    Today's paper had a story, sourced from the NYT, I think, that global recession was responsible for the price of oil going down $90/bbl over the last six months.

    That does not sound right.

    Demand just hasn't changed that much.

    There is plentiful supply at $100/bbl -- Canadian oil sands development was going full tilt until recently. Between Canada and the US, there is enough recoverable oil at $100/bbl to get us through the next 100 years or so.

    Therefore, I predict a longish-term price of $3 per gallon for gas.

    Presuming, of course, that we don't fall prey to irrational global warmism and tax the heck right out of the stuff.

    By Blogger Hey Skipper, at 18 November, 2008 12:14  

  • We shall see - gas just hit $1.43 in Kansas.

    Skipper, demand didn't change that much when it shot up by a factor of 2 either. I think there's a nearly fixed amount of gas that can be made, and that it doesn't cost very much right now to do so. If demand increases even slightly over the available amount, the price sky-rockets, and likewise, if it drops below that amount, it plummets.

    Either way, I'll buy John there a beer next time I see him.

    And I don't care much about GW either, but I do like less traffic, and I wouldn't mind starving Hugo of his spending money, so I'd be okay for a gas tax over CAFE standards and a cap and trade system.

    By Blogger Mike Beversluis, at 19 November, 2008 12:56  

  • After we get through this economic schlamozzle, I think we should place a variable tax on gas that puts a floor at $3 per gallon, which seems to be the pain point for people to change their driving behavior to something more sensible.

    Then use the proceeds for infrastructure maintenance and paying down the national debt.

    As for cap & trade, yucch.

    By Blogger Hey Skipper, at 19 November, 2008 14:07  

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