Having said that, I’m sure you’re intrigued by my subject line of this post. Last year I would have guaranteed you that we’d never see gasoline <$2, just like I guaranteed that we wouldn’t see $5 gas in 2008. It was getting close, but I wasn’t exactly sweating either- just look at the damage $4 gas caused! Even in 2007, I never could have expected for new record highs in gasoline. It is my firm belief that we are rewriting history books. There is no good answer here for what lies ahead as there has never been a "perfect storm" that has rapidly changed the oil markets since mid-2008.
The last few days I’ve been doing more and more research about this new market, and I’ve come to a few conclusions. First, my "predictions" of gasoline price hikes will not have the consistency they had just months ago as a result of this changing market. I’m trying to adapt quickly, but in a period of sustained price drops, it is VERY difficult to predict the first "major" price hike. Secondly, it is my belief that we may not see a rapid increase in gasoline prices like we have in years past. I’ve not come to this conclusion until lately. The Spring run-up in prices may temporarily end as we know it, replaced by a very odd and difficult to predict pattern of falling and rising gas prices, just like the stock market has been- unpredictable. Third, this period will change record books and be noted years from now as the spectacular oil crash of 2008. We’ve hit an ALL-TIME high in oil and a 4+ year low. Crude has lost over $105/bbl of value in places.
Bottom line is this- I’m not sure where things will go, but I have a few opinions. First, I would say that we will not see a spring run up in prices like we have in years past. Second, I believe odds are greatly increasing that we may see gasoline under $1 in the next few months. I don’t think the economy has gotten as bad as it will, and I think gasoline will follow it lower on its way to a level not seen in many years. Third- demand destruction is rampant. Oil companies will begin canceling refinery projects, stop finding new oil, and halt other infrastructure upgrades until oil prices climb- which may not happen until 2010.
I will work hard at bringing you realistic information and opinion. I’m not here to profit off what I say, the bottom line is the consumer, and to us I say "It’s about time".
Patrick, a difference of opinions is to be EXPECTED. If there wasn’t a difference of opinion I for one would go elsewhere. Opinion is just what it says and opinions vary. If they didn’t it would be a boring world wouldn’t it?
As for the rest of your post…I think it hits the nail on the head as far as the future holds. I don’t see much of a spring jump unless unemployment drops drastically and everyone buys Hummers and drives like drunken sailors across the plains….ain’t gonna happen. I see the US and world in a deflationary mode…good if you continue working, bad if your unemployed.
Dan in Rockford
P.S. VeraSun in Woodbury has stopped producing ethanol for the time being. Who woulda thunk it?
Patrick, we are in very strange times for the oil industry. Who would have thought that just a few short months ago these so called “experts” were calling for oil to go to $200 maybe even $300 per barrel. Where are those so called “experts” now? Hopefully with oil dropping to such low levels our economy will recover more quickly than what the “experts” think. I hope so….
Just for the record, it doesn’t bother me at all that Patrick and I don’t always sing the same tune. I like to think that we are harmonizing, though. 😉