Summer Gas Spec
With the summer fast approaching it is once again time to play guess the gas price. Though financiers generally look to WTI or Brent prices, the numbers at the pump can make just as much of interesting market. With not too long ago attempts to create a futures market on Hollywood box office takes, why hasn't anyone begun the organized speculation of prices at the pump?
Here are two converging counterpoints addressing the issue in recent real time. Which one makes more sense to you? Better yet, what's the price of a gallon going to be at your neighborhood pump by the end of August?
The Bear Necessities
Years ago when gas first shot over $2 I knew it was the sign of bad things to come. Resistance levels stretch quite easily once initially broken, this article proposing $6 gallons in the near future is a classic example. I am tempted to wax poetic about staying quiet when they came for my neighbor, but that won't do any good. The fact that we've already accepted $5 and are now talking about $6 is yet another reminder of how much closer every day brings us to the Second World. Luckily, with so many Europhiles in charge of sailing the American ship we will not be hearing many complaints from the mainstream coastal elites. Good luck to all of you folks depending on a truck to get you to and from work.
Bulltastic
For pure unadulterated humor disguised as information dissemination... step right up and claim your prize. Apparently, someone thinks prices will drop $0.50 at the pump. Giving steadfast rationale the likes of:
It all depends on the weather, trying to predict anything beyond 30 days is witchcraft.
Yes. Witchcraft. Sad as it may seem it is about how proactive we are in describing the effects of the current it's not hyper inflationary environment. Oh well. Let's throw some predictions of our own at the wall and see what sticks.
I say the dollar keeps tanking and we're at $5.19 for regular in the New York, Chicago, D.C and L.A metro areas by June. Who's with me?
3.95 national avg Aug 31st.
For starters, DC is already above $5. And studies have shown that gas prices are lower in the Midwest than on either of the coasts. Summer always sees somewhat of an increase in gas prices anyway.
One thing we definitely need to keep in mind is what happens if a fuel tax is imposed, something the Europhiles would love to do. The oil companies don't pay that; we, the consumer, do. It gets passed directly onto us at the pump. And the MENA chaos, though still there, has lessened somewhat.
Based on almost total guesswork, because some event could throw all the projections out the window tomorrow...national average of $4.50 per gallon.
Avg Daily gas price was $2.90 at this time last year. Today it is 3.96 (and climbing). The all time high was $4.11 7/17/2008.
Its funny because the last time gas spiked after Hurricane Katrina, people actually tried to use less gas. This time around, I'm not noticing it.
End of the summer guess: $4.25
Can anyone corroborate that the demand for gasoline has actually risen by percentage change in the gas price, I know it's an inelastic good, so in other words, what's the cause of this rise in prices? China? Weak dollar? Speculation? Supply Reduction?
In the end (20 years?), some form of electrical storage will render gasoline for automobiles as useless. Of course trucks and boats and jets and other things will require gas but their % of all the demand is quite low compared to cars.
$4.25 would translate to a sustained price of $120+/bbl for WTI. That's way too high. Would guarantee a pretty bad recession starting in late 2011.
All of those things have contributed to the price rises, too hard to attribute what % to each, but speculation post Libya played a big role.
I guarantee you that 20 years from now electrical storage will not render gasoline for automobiles as useless. There are a lot of issues with batteries and infrastructure requirements that are not easily solvable, even in a 20 year time span. This is a much, much bigger problem than it appears at first glance. We'll switch to much more efficient gas/diesel powered cars instead. You can even see this today. Let's say you're a relatively poor person and want to reduce your transportation costs, what are you more likely to do, plunk down $35K for a Chevy Volt, or spend $12K on a Toyota Yaris? That gives you a rough idea of just how high gas prices have to go before we start electrifying transport on a large scale (not to mention that such mass scale production would RAISE costs, not reduce them, because key raw materials for batteries, particularly the very good lithium ones, are not particularly abundant). Nevermind that the electricity generation has to come from somewhere, you're talking about a humongous increase in power demand.
I'll throw down $5.89
I think it all revolves around politics- whether the lawmakers figure stuff out on the debt.
I am an optimist about individuals but a pessimist about politicians. I think the dollar could lose 30-40% of its value by July on speculation about the demise of the USD and we could see $6-7 gas. As usual, politicians will blame it on greedy oil companies and summon them to Washington to explain themselves, likely in a Senate hearing. I suggest the CEOs take a hard-hitting approach- tell them the truth and say that oil prices are up because we've elected a bunch of incompetent buffoons who can't add up their bar tabs let alone balance a budget. Watching the far-left liberals squirm as economist after economist explains that gas prices aren't up in the UK, the EU, and Japan because their currencies aren't presided over by a bunch of demagogues and drunk sailors is going to be a lot of fun.
Agreed!
But what's even more ludicrous is how many people ignore the fact that there's a cartel controlling the price and most of the supply of the world's most traded commodity. How OPEC is able to even exist alongside the WTO is beyond me.
Would be interested to see the polling data on steady $4-5.00/gal gas at the pump if it came from more drilling offshore domestically in lieu of crude received from OPEC or the Persian Gulf?
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Tons of Vol in RBOB last few days. Mostly off of possible refinery outages due to Mississippi. Today RBOB was limit DOWN. Practically unheardof. RBOB is always a supply case commodity if you ask me.
The dollar is not going down the drain this year. QE2 will end in June and the dollar will go up, especially against the euro. The oil market is actually pretty well supplied for this year, despite the Libyan crisis. Expect WTI in the low 90s, Brent in the low 100s, and a gas price between $3.50 and $4.00 during the summer. I was calling for WTI to be in the low 90s back when it was over $110 and everyone was saying it was going to go to $130. The fundamentals never called for $110, and sooner or later fundamentals win out. If the price goes back to $110+ and stays there, expect a recession to start come Q3/Q4 (we'll probably get one anyway but the Feds will fudge the numbers like they always do and then initiate QE3).
Above poster makes a lot of great points regarding the transition away from gas vehicles. I would argue though, a fairer comparison to a Yaris is the Nissan Leaf, MSRP 25/26k. I am more optimistic about electric vehicles, but do agree that the technology has a long way to go. 20 years does not seem like much, but think about the difference between in a computer in 1980 and the one you owned in 2000. Night and Day. If we have the technology and it makes economic sense, the infrastructure can be put in place quickly, to the point where we will have an oversupply.
If we can work out the battery situation, electric cars offer reduced number of parts, less maintenance, cheaper fuel, and other benefits.
Something I forgot to mention is that I believe that we will see a shift toward denser transit oriented development, and those types of places will rise in value quicker than most suburbs, except for the inner suburbs of major cities. Additionally, secondary cities will be redeveloped to take advantage of existing infrastructure. The cheapest gas is the gas you don't have to buy.
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