Wednesday, August 31, 2011

Annual Gas Price Forecast

I recently realized I had neglected to make my annual gas price forecast at the end of July, as is my normal habit (been doing it for about 8 years). Well, it isn't going to be so important in the future as it was in the past, as crude oil and therefore fuel will not be going into an ever growing shortage as was thought in the past. We now know of reserves that will sustain us for the next 40 years (sorry, I don't have a good supporting article for this) if need be. The "Peak oil problem," for the time being, has been defeated. Reliability of delivery is becoming a bigger question, but I will save that for another article.

As the world economy and more locally, the US economy have drifted into the doldrums, the price of oil has stabilized in the $80 to $90 range, and actually these numbers reflect optimism on the part of speculators that the world economy will improve. Should we slide into the dreaded "double dip" recession (increasingly unlikely, since Bernenky announced interest rates would remain near zero for the next couple of years), oil prices will slide back into the $70's of dollars a barrel.

Well, using my formula, $80 a barrel translates to $3.70 per gallon (regular unleaded, here in rural Texas), and $90 a barrel translates to $4.10 per gallon. Link

While that is still quite a range (but really only 10%), it is more dependent on politics and weather than it is on any predictable factor. Most importantly, it is dependent on how friendly (or, more likely, unfriendly) the current administration (read EPA) and courts are towards the oil industry, and how much our government devalues our money by printing more of it.

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