Price of Gas will stay relatively low
December 13th, 2008 at 2:11 am by Bill Steffen under Bill's Blog, News
Since I’m in the business of predicting things, let me take a stab at the price of gasoline and oil. We just saw a reset to $1.75, and the cold December means that more oil is going to be used as heating oil in the northeast. Right now, the global demand for oil has dropped an astounding 5 billion barrels a day to roughly 81.6 bbd…that’s a drop of about 6%. Non-OPEC nations ( U.S., Canada, Mexico, Russia, Norway etc.) produce about 50 bbd, while OPEC nations produce about 32 bbd. OPEC nations talk about reducing output…BUT…here’s why they can’t . You’ve got Hugo Chavez in Venezuela. In 2000, Venezuela needed a price-per-barrel of $34 to balance it’s accounts…today they need $97 ppb! Russia and Nigeria need a ppb price of about $70, Iran needs $58 and even Saudi Arabia needs about $62 (figures from PFC). These counties that were awash in oil cash when oil was $147 a barrel are going to be hurting soon (to the point where they might fear civil unrest). These countries just can’t cut their production, because they need all the cash they can get. In the long term (2010? 2011? 2012?) oil will likely rise again, but in the near term – gas is going to be relatively cheap.
Hey, I’m first in this blog entry. I do HOPE the gas prices continue to come down. I saw where they spiked 25 cents on Friday due to what speculation?
I think we have a ways to go…..I hope the gas prices come down to a dollar and go below that, its one positive thing that is helping people deal with the horrible economy.
Gee, does that mean that the OPEC gang will have to trade their Maybachs and Benzes for Toyotas? Maybe they can use their oil to deep-fry camels.
The problem Dan is that the gas prices are low BECAUSE of the horrible economy. Odds are if gas prices go lower, it will be because demand falls farther, because the economy is worse.
$4.00 gas WAS a bummer, but it was better than having the value of my IRA cut in half.
Michael G, another problem with the price of oil this low it that the big oil boys will not be looking for more and when the demand dose go back up (assuming the economy gets better) there will be yet more of a supply problem. I would like to see the price of gas (I do not know what the price of a barrel of oil would have to be to support it) but a gas price in the $1.99 to 2.50 range would be IMO a ideal sustainable price range that would not harm the economy and keep the supply in order. I am sure other have other ideas. As for our investments accounts I not sure if they will ever recover and if they do how long that will take.
SlimJim
Gas Prices really not that closely tied to the Economy except that people are putting as much $ into their gas tanks. These are separate issues! It sounded like you were equating the drop in gas prices to your IRA losses, Michael. As you know it isn’t that simple. The Economy has a much more profound effect an yes it can “trickle down” to the price of gas but a lot more is involved.
I believe there is little to no hope and faith left in the value of things. I believe there have been so many people who live “high on the hog” CEOs, Wall Street folks who no longer can be trusted. This is coupled with government’s action or lack there of, all these play a part in how people feel (country) about spending money. This also factors into the value of the dollar which has gone significantly.
Gas experts saying prices could fall below $1 before climbing again!!!
Wrong Dan. The worldwide economic slowdown/recession/depression is the cause of the losses on Wall Street. It is also the cause of the steep drop in demand for oil which has caused gas prices to tumble.
Ironically, it was the steep rise in oil and gas prices that was a key contributor to the recession in the first place, and if and when the worldwide economy does pick up, oil prices will rise again. (Along with my IRA)
Bill,
You should get a new weather link on here about the next two weather systems after this weekend! Including a new link to the NWS discussion…
Michael you have your facts confused here. You need to gather them all before you go telling people that they are wrong. First, you say it was the downturn in the economy that caused the oil price to drop because demand was low. There are elements here are true. Gas Prices as well as the value of the dollar are all built on one thing….speculation. It is what contributes to increasing value and causes demand in the market so that part is true. The Economy is based on so much more than the gas prices alone. Then you say the steep gas prices were a contributor to the recession. I beg to differ with you, respectfully. The Economy began taking a huge downturn way before (three years ago) all the gas prices began changing. It has to do with checks and balances. The housing mortgage loan began to collapse first. Do you remember when there were numerous foreclosures? The lenders put through loans prior to making sure that people were not already too far in debt. This created a lending frenzy because the credit system was being taking advantage of in astronomical porportions. Meanwhile, the foreign auto makers were basically kicking out butts at making better automobiles, marketing them and selling them. It was just prior to this, The Stock Market was at a record high levels because of speculation that THINGS ARE GOOD. This is a key point here. Things were not good. Speculation drives up the value which creates demand. If the speculation is based upon crumbling system than value begin to go down. Factor on top of that, greedy CEOs and Traders on Wall Street. They kepy moving up the value based upon what they thought was going to happen. Nobody kept them in check (all of them) The gas price is only a symptom of a cyclical economy. Also, do your research on the value of a dollar. It has steadily decreased in past few years. Yes, it is true that you can draw parallels from the economy to the gas prices. It is not the cause of the Economic downturn but merely a symptom of what is going on.
Micheal, I tell you one more time, before you go telling people that they are wrong you need to do your research and look at the facts.
Do your research Dan. Aside from against the euro, the dollar has be RISING for the most part for months now. It did take a dip in the last week on speculation that the big three would go down.
What do you think started the mortgage loan collapse? The increase in the cost of living, caused mainly by rising fuel and food prices is a major part of what CAUSED people to stop paying their mortgages, and brought the whole thing down.
All I was saying was that the same factors that brought gas prices down, brought wall street down. I’m not so ignorant as to think, like you pointed out, that my mutual funds went down BECAUSE gas prices went down.
Nope! You are not yet identifying the cause Michael. The Economy was robust just prior to the mortgage meltdown. In fact just post 911 the Economy was on the way back up. It became greedy people driving up values and approving loans based on very little concern whether people could pay them or not. Enter the speculation now (during this time frame), market is good. Economy is good. This creates demand, Michael. You seem to be only wanting to name symptoms and results of the Economic downturn but you still have failed to demonstrate or show the reasons. You are dead wrong about the value of the dollar and you need to compare it World-wide not just to the Euro. Use Gold as a measuring stick and you’ll have something to compare the dollar to, its about value, Michael. You said, the gas prices went and so did your IRA, not me. That is how you stated it in your post. I raise these points because, what will my kids inherit if we don’t all “pull together” and begin to take steps to help the economy gain and grow again? Will my children and their children be strapped with huge taxes because of what is happening right now? Right now, many are very fearful and this creates more and more panic. We must settle down, it’ll take some time but it’ll get better again, hopefully!
As I stated the value of the dollar has been rising in recent months, and the price of gold peaked 5 months ago at almost $1000. It has fallen since.
http://www.goldprice.org/gold-price-history.html
The dollar index, which compares the strength of the dollar to worldwide currencies is up better than 9% year to date.
http://www.cnbc.com/id/28199127/site/14081545
I’m not saying gas prices caused the recession. The economy was a house of cards built by consumers and the government all spending more than they made. The spike in energy prices was the breeze that started the cards falling.
One of the reasons for falling demand is the fact that so few people have jobs to drive to anymore. Add to that the fact that you just call MARVIN every 2 weeks instead of having to drive to the unemployment office. The economy is tanking because you don’t go out and buy a $20,000 car or a $100,000 house when your income is limited to what you draw from the state every 2 weeks. This entire country has been living on a credit card since 1932 and the bill has come due.
The lower gas prices hopefully will remain for a year or so..and Americans have the mind set to 1) live within their means and get law makers to do the same (rainy day accounts?)2) get very conservative with Foreign Fuel like buying ethenol or bio-diesel, electric cars, car pool, mass transit, or anything else to lower consumption (when the economy comes back it will have higher fuel costs attached to it and it will slow down the recovery, if there less demand it won’t be as bad 3) buy American made products….went to the west coast two weeks ago “The Big Three” appear to be only one out three on the road!