Back to $4/Gallon Gas?
Steven L. Taylor
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Saturday, January 1, 2011
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26 comments
Via USAT: Oil up 34% since May; average gas price hits $3.07:
The price of oil is poised for another run at $100 a barrel after a global economic rebound sent it surging 34% since May. That could push gasoline prices to $4 a gallon by summer in some parts of the country, experts say.
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored
A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog).
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Well, as a guy they interviewed on the local news about increased gas prices said, “You just have to cut back on food to afford gas.” And that means the the coming increased in food prices as the grocery store margins have absorbed as much of the producer increases they can will lead to reduced purchases, which will lead to reduced production and declining jobs outlook. Hello, the terrifying prospect of dismal employment for the 2012 election season.
When gas hits $4 the fear may be that people will pay that to drive to DC and start stringing up the incompetents in charge. It’ll be nice, cherry blossoms and desiccated elite to greet the global warming.
There was a guy with a $5 prediction, just a little while ago. Ah, I see it made the body of that USAToday piece.
I used to be really into energy/environment issues. My take-away was that there wasn’t a lot of slack production, and that new sources were very much more expensive than old. I heard something on the radio recently that reinforced that. It was a piece about middle east politics. It was explained that while Saudi Arabia can make money on $70/bbl oil, Iran needed $90 to make a profit, and so Saudi used their production to maintain a price between the two.
That totally shocked me, because back in the day we were told that Saudi could raise oil from Ghawar from something like $10/bbl.
If Saudi needs $70, something fundamental has changed. If not Peal Oil, then at least the CERA’s Undulating Plateau.
A good deal of this will be speculation, Occidental reopening the Phibro trading desks, so will Goldman, but you don’t think the drilling moratorium, has a little to do with it, Hofmeister’s still
plugging his book, The Chinese are tapping their sources in the Sudan, the Russians, the Mexican government is still drilling, we’re the only ones who aren’t.
narciso, to paraphrase Sarah Palin, I can see our drilling from my house.
(Not quite, but within 5-10 miles)
Narcisso,
You can drill every source of oil within our waters, there simply isn’t enough cheap oil left to make a difference of more than a few pennies per gallon.
“A good deal of this will be speculation, Occidental reopening the Phibro trading desks, so will Goldman, but you don’t think the drilling moratorium, has a little to do with it”
If a temporary shutdown of less than 15 rigs is causing this then I’d say that the problem is that less than 15 downed rigs can cause it in the first place.
If you had offered to bet me back in 2006 that gas would still be hovering around or below $3/gal (in my region) in 2011, I would have thought you crazy. And I would have lost a lot of money betting against the fool arguing that gasoline would still be at current prices. And if someone offered today to bet me that gas will be hovering around $3 a gallon in 2016,
Ultimately, though, what happens, happens. As prices increase, there will be increased pressure to push them lower through increased exploration and utilization of alternative sources. And if that fails, consumption will reduce as economic necessity dictates.
As I recall gas shot up to 4.499/gal in 2008 and fell from that mountain top to 1.999/gal in a matter of weeks in 2008.
Which one of these fortunetellers predicted that roller coaster?
I know at the peak of that run I heard many sage remarks about how we would never see $2 or even $3 gas again.
So one guy envisions $5 gas in 2011 and another anticipates that price in the next decade!
Are these swamis all looking at the same numbers but tuning their crystal balls to different channels?
We can divide what we know from what we don’t know.
We know, for instance, that China is now selling more automobiles than the US. Heck, I understand that GM sells more cars in China than the US. We also know that oil companies have exhausted cheap, easy, land-based fields, and are moving to deep and difficult locations (deepwater horizon).
So we don’t know exactly how that will equate to price.
But again, increasing consumption from more world-wide buyers, while facing limitations in production … how does that usually work out?
Shorter: There is certainly more upside potential than down, at this point.
The global recession tested the downside. $3 was the answer.
JP: There are 3 words in your post I can agree with..”we don’t know”…
As with all seers who divine the future all I ask of you is to be more specific.
I want exact dates and price figures when you make these forecasts.
There is always more “upside” potential since the downside stops at free.
I predict that gas will never be free.
I actually agree that nobody knows the specific future, which is why I take such strong exception with those crazed Peak Oilers, or promoters of collapse. They are people who essentially write up science fiction, and then believe their own story. I suppose a good disaster movie if fun. Though you need zombies to really make it great 😉
So I’m afraid “I want exact dates” is exactly the wrong thing to say. There are people who will give you those, or the ending DOW for 2011, or the Presidential winner for 2012. But, the more specific you get, the more you know they are making it up.
It is much safer, and saner, to acknowledge trends – while identifying what it would actually take to break the trend. Right now car sales are climbing in China, and post-recession driving is increasing in the US. Those would have to reverse to break the trend.
BTW, here is a good book about energy consumption and shifts. It talks about possible futures and does not mention “peak oil” once: A thousand barrels a second. Recommended.
Oh no. Now I’ve said “exactly the wrong thing”. According to jp.
Apparently when prophets aren’t quite so specific we can’t be sure if they are making it up or not.
That doesn’t help much.
I guess car sales in China and post recession US driving are the only two factors..er metrics (I want to sound like I know what I’m talking about) that can “break the trend”.
Feel free to name the trends you see. You know, any factors you see holding down gasoline prices.
Is fleet MPG increasing? I don’t think so.
Is the dollar getting stronger? Not right now.
I’m not trying to predict the future. The only trend I see is a lot of “experts” heating up the blogs with wildly disparate visions of things to come.
They are arguing from a position of authority and I am questioning their authority.
John Personna, here are a few things that may help hold down gas prices:
1) Increased CAFE standards are coming.
2) Current demands are set in part on fleets that assume relatively cheap gas. As gas prices go up, people will alter their consumption choices, affecting gasoline demand.
3) When gas hits a certain price point, stripping Utah for shale, offshore drilling, and arctic drilling start becoming more economically feasible and political opposition to them becomes harder.
None of this is to say that gas prices won’t go up. I have to think that they will. But I think that there will likely be moderating influences.
John,
Peak Oil is not crazed. It is a matter of simple scarcity, unless you believe oil supply is not subject to definite limits.
Trumwill, on 1 the SUV escape clause is reduced but still there, on 2 it usually takes decades to change a fleet. It happened in the 70’s with genuine fuel crises, but hey, they were shooting people too. On 3 that’s kind of the point. if it takes $4, 5, 6 dollar gas, you’ve just left that $3 zone that people have come to expect.
Ben, a typical Peak Oil conference is split between somewhat reasoned reservoir analysis, and people who want to teach you to build cob huts. For a while that confused me, but I’ve come to believe that Peak Oil, as a movement, really is about the huts. It isn’t just the colorful fringe, it is the underlying fear. See also Arch-Druid Greer
“Hello, the terrifying prospect of dismal employment for the 2012 election season.”
Well, Sarah Palin is going to need all the help she can get…
John, I think we’re mostly in agreement. Gas prices can’t really stay where they are indefinitely. And $4-6 is not an unreasonable expectation in the coming years (though I’m tired of hearing about it being “right around the corner” as I have been hearing from years, and shale could keep it below 4). I was thinking on the more broad subject. The folks looking forward to the day of $20 gas.
Ben, the concept of peak oil isn’t just that we will run out at some point. There is the assumption that we will hit that peak soon. That it’s something we need to worry about now because a shortage is coming. I have to admit I have a bit of a chip on my shoulder because my elementary school teachers, in the 80’s, talked about it happening soon and that within 50 years or so we would be returning to an agrarian society with only the electricity we can generate on exercise bikes. That stuff literally gave me nightmares.
I realize that this is an extreme variation of the peak oil believers. And a part of me thinks that this really is something we should be worried about cause we’ve got to be hitting the peak soon. But every generation has real reason to believe that the end of the world is coming (soon) and that the United States of America is descending into fascism and/or chaos and/or third-worldism (as we speak, or as soon as the opposing party takes power). I’ve come to put Peak Oil in that category.
Doomsayers are Doomsayers are Doomsayers.
Doesn’t matter if they are Holy Rollers or Climate Alarmists or Peak Oilers or Population Time Bombers. They all have their Holy Books which were all written by human beings who make mistakes. They all have their prophets either living or dead. No matter how wrong their predictions are, like 2000+ years and it hasn’t happened yet, for them it will always be around the corner.
All I know for sure is NO ONE can predict the future!
I think what the Peakers do is take something that must be true in the long run, and compress it into a timeline that “makes a good movie.” You know, like that movie where they froze NY in 3 days, as “global warming.” Same deal. A climate shift over a century or two doesn’t make a good movie, on the screen, or inside our heads.
Here is my personal expert as of today. Not only does he refute the $5 gal in 2011 prediction he states the claims were made to grab attention and headlines.
http://www.pfgbest.com/services/research/blogs/energy-report.asp