Will gas go back down- again?

[Mr Nice]

Quote:
but the days of cheap gas are forever gone...IMHO...

Yep, but many Americans simply don't want to accept the truth.

I wished I didn't purchase my 40 MPG Honda Civic and purchased a more fuel efficient vehicle.

 

[Ursae_Majoris]

Originally Posted By: Astro14
Folks don't realize just how sensitive the market is to supply changes...it's a tight market...small percentage changes in production lead to large changes in prices...and the "speculation" is just that - people trying to guess the future and trying to share the risk through financial markets. Southwest Airlines, for example, made over $900 million in 2006 by buying oil futures the previous couple of years (they lost money flying airplanes...but that's another story...). The airline industry gets crushed by jet fuel price fluctuation (United Airlines buys about a couple billion gallons of jet fuel a year...move that price a few pennies a gallon, and you're making a real difference in the bottom line) so they "hedge" or share the risk or "speculate" by buying future oil production...so that if the price goes up, they can sell those contracts at a profit to offset the losses from running the airline. It's basic business...and lots of businesses and industries do it...

But that hedging is not the only factor that affects the prices... For example, close the Suez canal (that was the real concern in global markets...not Libya's production). Now, every supertanker will take twice as long to get to market...

So what? We have to wait a few more weeks to get our oil? no...actually, because the round trip now takes 8 weeks instead of 4, we lost half of our transport capacity, it's as if we have half the number of ships because each ship can only deliver half as much per month...and the 11 million bbls the US imports daily drops to 5.5...

The concern of that possibility as Egypt rioted caused lots of responsible businesses to "hedge" or "speculate" by buying futures...

It's just not so simple as "evil speculators"...there are real reasons to speculate...

A voice of reason in this thread. Also do not forget the devalued US dollar. Since oil is priced in dollars, as dollar value drops, oil price goes. 2 years ago there was quite a bit of talk about new world reserve currency. If US monetary policy does not change, new currency might become a reality.

 

[Spyder7]

Originally Posted By: Nick R
So regardless of whatever is supposedly being, or not being done, in washington about gas prices. There is no supply and demand issue here- oil companies are once again, about to post record profits as we see $4 a gallon in the US- and higher in Canada, Europe. But we saw this back in 2008. And then prices crashed down into the $1 range. We went from $4.26 a gallon to $1.85 in about a month, iirc. The question everyone wants to know is- will it happen again?

Not being an economist by any stretch of the imagination, I think it will. What goes up, must come down, right? ......right?


Absolutely. It will always dip a notch here and there. It will also continue increasing overall, eclipsing prior spikes as it does so.

-Spyder

 

[65cuda]

Unless the economy totally tanks I don't think that we'll see below $3. again. China and I believe Brazil are using oil in greater quantities now so it will keep the demand side up. Makes that .13 and .16 gas when I was a kid a long ago dream.

 

[Tempest]

Current prices are driven by the intentional devaluation of the dollar via quantitative easing. Same for food prices.

 

[mechanicx]

I think at least in the short term oil supply and demand is stable. It is speculators causing price volatility more than real supply and demand rapidly changing. I don't think prices will every come down for the long term. Everyone will agree the market speculators can create a housing bubble, a gold bubble etc but if you say there's an oil bubble you get endless denials and excuses. I think the oil bubble is one that isn't going to pop though.

Yes gas did spike in 1980 to about equivalent to $3/gal but it dropped sharply and stayed low for several years. We are in a price spike that has been going on for about 8 years now. I don't see it ending.