Where will fuel prices level out?

These guys are seeing $7-10 a gallon and OPEC is warning of $200/barel.

http://www.nysun.com/news/business/gas-price-may-soon-cost-sawbuck


http://www.ft.com/cms/s/0/4200dc9e-1521-11dd-996c-0000779fd2ac.html

World demand will just continue. Don't forget Tata is about to unleash their $2,500 car in India. With all those new cars there and in China demand will keep prices up. A Prius is looking pretty good about now...

 

Not too long until the price of a tank of gas is more than the price of used tata's!

 

The real question is: at what point do fuel prices rise to make alternative energy sources viable? We are still a ways off, but the oil companies are only going to be profitable until some genius comes along and figures out a way to power an automobile some other way. Any company that uses fuel as a part of their business will eventually come around to funding some of these alternative energy companies.

The problem is that 7 dollar a gallon gas is going to cause quite a stir. Taxi companies are already taking a beating here in Chicago and have just raised the base fair a dollar. Trucking companies will suffer who are transporting goods and natural resources...raising the cost of basic commodities and the cost of living rises worldwide.

I really hope our government starts spending some serious money to fund some new ways to move people, resources, and equipment at a lower cost.

 

I think we will run out before the prices level out. China and India are just being produced to the magnificent automobile and soon will be buying them all up. The demand will increase exponentially while the supply continues to diminish, resulting in ridiculous prices.

 

Remove traders/speculators from the market and the prices will fall. They use it as something to combat the declining value of the dollar in their investments. When priced in Euros, a barrel of oil has been about 65 Euros for sometime now. Something like only 23% increase in price from this year to last compared to 40% in USD.

 

when it cost more a month to fill your tank than what the payment is for an electric car. that's when things will change. the company who can get a car for that price will be a big winner.

 

Why are people so crazy about electric cars or battery packs? We don't have an infinite supply of heavy metals to make these batteries. Not to mention how much it pollutes to mine the metals and then dispose of them. The only electric I would agree with wouldn't involve energy storage for it. More like an electric grid some trains use that feeds it power as it moves. That's unreasonable imo.

The best bet is to reduce consumption rather than finding alternatives to maintain current consumption levels. I think I posted something like this here a while back. I see people driving around by themselves in large cars, which is completely unnecessary. Build more public transport systems and tax cars/gas like crazy to get people to switch to mass transports. Economies of scale will take over and less energy would be used. Cars themselves should be redesigned to be as light as possible. Carbon fiber bodies, carbon brakes (longer lasting), turbo diesels, mechanical flywheel energy storage for braking systems instead of battery packs, etc. Cars that weigh less use less fuel, require less frequent brake and tire changes, and road wear would be reduced. We're doing the opposite--building cars larger and heavier than before.

 

This seems like a protracted game of chicken between OPEC and the US economy, we are all on the front bumper and are the first to get crunched unless someone blinks. OPEC will continue to cut production, IMO just to see how high oil can go. But like the greedy little b***ards they are, eventually the price will come down and they will be powerless to stop it by limiting production.

This will be because our current, and worsening, pain with all things fossil fuel will be resolved ultimately by developing sources to replace dino juice. Either party's new administration in the White House will almost undoubtedly have a very different energy policy than the Bush administration. Expect a record number of nuclear power plants to be started by 2010. The wind/solar capacity of the US will go from miniscule at present to a sizable percentage by the end of the next decade.

But perhaps most importantly, how we view our transportation and leisure travel will have changed as well. Soccer moms running errands in their Yukon XL will simply stop, and those 12 mpg Yukons will be virtually worthless on the used market. Office professionals may start to have more options to work from home. McMansions will be just wasteful ostentatious jokes to all but the very wealthy.

The thing is, over the last few months I have resigned myself to the likelihood of this getting much worse before it gets better. The only bright side I can see is that ultimately after we remove ourselves from OPEC oil dependence, we will never have to go back.

 

Except that there's a difference between the fossil fuels we use to power our electricity plants and the fossil fuels we use to power our cars. Replacing the fossils fuels (natural gas, coal) with nuclear power is good for the environment, but will do next to nothing for reducing our consumption of crude...unless we all buy electric cars.

 

Classic models, on the other hand, hardly play a role anymore in explaining the price of oil. The fact that relations with Iran have eased a little, or that there has been cautious improvement in Iraq, won't interest traders. They alternately attribute price changes to the crisis in the Middle East, to winter, to unrest in Nigeria and to exploding demand in China.

"None of this is new," says Fadel Gheit. "There hasn't been peace in the Middle East since Biblical days. And the conflict in Nigeria has also been going on for 40 years." Not to mention the recurring return of winter.

From http://www.spiegel.de/international/business/0,1518,538412,00.html

 

Petrol is the equivalent of $10 a gallon now here in the UK

 

I agree that nukes will not directly reduce our use of crude for gasoline production. As you probably already know, if you look at the daily consumption of barrels of crude per day and compare that to the gallons of gasoline used per day, it appears that the first 20 or so gallons in a barrel is used to extract as much gasoline as is feasible, then we use the rest of the barrel (that cannot be used to make gasoline) for other things.

I was merely including nuclear power because it is a proven and relatively safe form of power, the US has its own supply of uranium, and using electric heat has the potential to replace heating oil in many parts of the country. Removing demand for some of the "other stuff" in a barrel of crude should only help to bring prices down a little, which should also reduce gas prices. But then the President of Nigeria gets a cold and the price jumps back up, so who knows.

Conservation or replacement really are the only long-term solutions. I know this has been predicted before, but the days of the 6.0L SUV appears to be limited. Within the next 15 years we will see a huge change in how we look at transportation. Can you imagine $320 to fill up a Suburban?

We will be lucky to maintain the same lifestyle, but I plan on trying like hell to keep the same quality of life...

 

I am surprised that there hasn't been a special congressional committee assigned to investigate why oil reserves are up, gas supply is up yet prices keep going up?

 

Any conspiracy theories out there?

 

The gas prices will drop and stablize after elections. The gas price is driven by lies and greed.

 

It's all stupid. Just like with everything else, There are tons of people right now designing the new technology that will allow oil companies to dig deeper and farther to find oil deposits that have yet to be discovered.

We are never going to run out of oil.

When the tech stocks blew up in 2000, people put there money in real estate, In 2006 when real estate blew up, people put their money back into the market and they have choosen what's hot. Commodities are hot.

Same thing except this time it is costing everyone money.


We as Americans just need to figure out how to pop the bubble.

 

Ok King!!

Let's force everyone to live life the way you think it should be lived. We'll take away everyone's large cars, we'll TAX the things you want taxed (gas and oil) so as to create "artificial price controls" and force everyone onto trains and other public transportation.

Government intervention only makes problems worse.

Capitalism will solve this problem for you. I say let gas prices continue to rise. The more they go up the more quickly an alternative energy will be found.

I love this article:
http://www.wired.com/cars/energy/news/2008/01/ethanol23

I have an airplane. My gas costs me $7.50 a gallon.

 

Answer: Increasing demand from developing economies (read: China & India).

Or were you just making fun of congress? If so, well done.

 

I pay $5.40 CAD for a gallon of premium here in Canada.

 

If US demand for oil is more inelastic than European demand (it is), and global demand increases (from China and India), then the price increase in the US will be higher. In short, our lower degree of substitution away from oil means that our price goes up by more than that of Europe...speculators are always the scapegoat.

If investors use oil to hedge against a weak market/currency (they don't, it's so volatile that, by and large, they move into gold and other commodities where cartels and geopolitics don't matter), then when the market turns around, and the Fed starts raising interest rates, your theory says the price of oil will fall.

I'm betting opposite.

 

...And no one talks about the oil companies being the solvers of the problem. People think they want to wallet-rape until supplies dry up; however, go take a gander at Shell's balance sheet. Or go for Exxon. They're the guys who are throwing money at the R&D, here. Big oil has more incentive than anyone to capitalize on future energy (via existing infrastructure, brand value, etc.), and I frickin hope they do. It would be great to have such a demonized industry come to the world's rescue...what a bitter pill for Gore and the Greenies.

 

You make several good points. For the longest time oil has been so cheap that there was no incentive to create new technologies. I work in the alternative energy field and admittedly high oil prices are good for our business because now it is becoming more and more cost effective to utilize our technology.

Regarding the oil companies, I hear conflicting reports on whether or not they are reinvesting their profits into new drilling techniques. I've worked with some petroleum servicing companies who are trying out new technologies but have had difficulty in finding oil companies to take advantage of it. And beyond oil, there are HUGE deposits of coal (especially in North America) and there is technology to gasify coal and make it a more usable fuel, but it is still not economically feasible. Maybe things will change now. And when are we just gonna go ahead and drill the ANWR? Specialists say ANWR could provie 1M BB of crude per day, translating into 23 million gallons of refined fuel daily... that is NOT an insignificant amount. We have the expertise to minimize environmental impact, there's no reason we shouldn't be using our own natural resources. And the advantage of one barrel of oil from here is one LESS barrel of oil we have to buy from Chavez or Ahmedinijad. Plus more jobs and more tax revenue for the government.

The recent huge flare in oil prices is due to what you said..... "Commodities are hot." The housing crisis damaged the economy and combined with a weak dollar to try and fix the economy, big money investors plunged their cash into commodities as a way to weather the storm. Without this speculation, many economists think oil should be nicely below $100/bbl. Gold and other metals have fallen significantly the past few weeks. It will be interesting to see how things play out with crude the next few months, especially with the FRB meeting this week.

What worries me is that oil consumption in many countries is not influenced by market prices as their governments put ceilings on fuel prices. China, most of the Middle East, Venezuela, Nigeria, etc, all have fuel ceilings and as long as these governments continue to absorb the crude price increase or force the rest of us to make up their costs due to increasing demand, oil will remain expensive for us.

 

I have no problem with the price of gas. It could increase to $10 a gallon and I will still drive my car just as much as I do today since I can afford it. In fact, I want the price to increase from where it is right now to keep the traffic low and larger cars off the road.

I never said I would want to live a life like that. I wouldn't mind paying a tax on a Ferrari in 50 years if it runs off of gasoline, but everything else runs off of electricity from nuclear plants. It was more oriented to the majority of people who look at cars as A-to-B things. That's not me.