Anticipated gasoline price

[Sam]

How fast gasoline price would rise in the next 5 years?

[TromboneAl]

Here's my prediction: at some point oil producers will get concerned about the development of alternative fuel vehicles, and drop prices substantially.

[ERD50]

I'll take a slightly differently worded view of Al's post:

If alternate fuels (or solar->battery->car) become cost competitive with petroleum products, the laws of supply and demand will kick in and constrain the price of petroleum.

-ERD50

PS - I voted 'higher than inflation', two reasons. it's been lower than inflation for a long time, and growing world demand, plus environmental concerns will probably drive the price up (demand plus taxes).

[justin]

I voted inflation minus 2-3%. I think we are seeing a peak right now, and I don't expect much more of an increase over the next 5 years. Prices go up and prices go down. We will probably see a lot of long term reversion to the mean. One thing is for sure, gas prices will continue to be volatile.

[TromboneAl]

Well, it will take a while before there are enough alternative technology cars to cause a drop in demand.

It's the development of the alternatives that the oil companies need to quash.

[Sam]

Not sure I agree with you TAl. Development of alternatives has been going on for at least a decade now (solar, wind, geo, bio). What makes it different now or in the near future? The way I see, it would take at least a few more decades before these alternatives become price competitive, in the absence of artificial interference via goverment's subsidies.

Justin, what makes you think we are seeing a peak right now?

[justin]

Quote:

Originally Posted by Sam Justin, what makes you think we are seeing a peak right now?

Mostly a gut feeling. Growing up, gas was always about a buck a gallon. Then a few years ago, it started getting more expensive. My guess is the long term average price will be somewhat less than today.

An economic downturn internationally (or here in the US) might cause a pretty sharp and sudden decline in gas prices.

[Sam]

Adjusted for inflation, even today's gas price is about the same as it was 20-25 years ago.

[dumpster56]

We are really at peak oil. when the oil fields in saudi arabia start to decline which by some reports are, just wait. One bad placed hurricane in the gulf one bomb in Iran its all a cr@p shoot but 100 a barrel in 18 months is not out of the question.

The Oil Drum: Europe | Will OPEC increase supply in the 2nd half of 2007? Or has Ghawar peaked?

The Oil Drum | In Defense of the Hubbert Linearization Method

[yakers]

I think it will be a bit more than inflation. The check on middle east oil is the Canadian & other tar sands. Once it becomes economic to process the tar sands that will cap oil prices for quite a while. But I wonder what fuel will be used 100 years from now.

[dex]

Can you confirm the numbers for me?
Assume currently $3.00/gallon & inflation at 3% for all 5 years
I'm not taking into compounding here.

Future gasoline price relative to inflation?

Much lower (inflation - 4% or more) net decrease 5% or 2.85/gal

Lower (inflation - 2-3%) - net in/decrease 0% 3.00/gal
Same as inflation (+/- 1%) - net increase 15% or 3.45/gal

Higher (inflation + 2-3%) net increase 30% or 4.00/gal

Much hier - inflation plus 4% - net increase 35% or 4.15/gal

[Independent]

I voted 3% higher than inflation -- the real cost doubles in 24 years.

The overwhelming fact is that there's only so much oil in the ground. The more we pump, the less that's left; and the greater the cost of finding and pumping the next barrel.

I don't think technology bails us out. Crude oil peaked in 1979, so we've been working on this for almost 30 years without a lot of success. I don't see any breakthrus on the horizon.

The cheap oil is all under land controlled by unstable or unfriendly governments. That suggests a lot of volatility. (It also means that when we buy oil we're increasing the revenue of the gov'ts in Iran, Russia, Venezuela, etc. But that's another thread.)

I'll agree that something like the tar sands, or even oil from coal, expands the supply at some price. However, China has just become the second biggest car market in the world and it has a long way to go. Then there's India, Indonesia, etc.

Increasing demand and decreasing supply can only mean higher prices.

(I would have voted for 4%, but we are probably at a local high point right now.)

[Sam]

Quote:

Originally Posted by yakers But I wonder what fuel will be used 100 years from now.

I'm pretty sure nuclear will be there.

[chinaco]

We are sc3wed. I think petroleum based fuels will continue to increase substantially due to supply/demand imbalance as China and India compete for the limited supply.

It seems to me that there are 4 viable near term solutions (in combination) for automobiles:

1. Smaller/more efficient cars
2. Some form of alcohol based fuel
3. Hybrid technology
4. Efficient engines (maybe diesel), using efficiency techniques like shutting down cylinders at cruising speed... and other techniques.

We should have vehicles that target 50-60 mpg today. Perhaps 75-100 mpg (highway) in 10 years. Of course, ethanol does not deliver the same mpg as gasoline... The mpg may be a little less with ethanol.


Hydrogen fuel and fuel cells are probably 30-35 years away. For a variety of reasons (See DOE web site on the subject).

[SonnyJim]

Since I heard that OPEC was mad that we are pushing alternative fuels and were going to punish us by cutting production, I voted that the price will be higher than inflation.

[justin]

Quote:

Originally Posted by Sam Adjusted for inflation, even today's gas price is about the same as it was 20-25 years ago.

True enough, today's price is around what it was 25 years ago adjusted for inflation. But the price 25 years ago was also a high point. Gas prices since then have been lower in real terms up until the last couple of years. The nominal price of gas was lower during almost all of the 1980's and 1990's than it was at the peak price in 1981 (or even the average for all of 1981).

I could be wrong, but I don't understand why gas was "worth" around a buck or so a gallon for 20 years, and all of a sudden it is now worth triple that price. I know the inputs are much more expensive and refinery capacity hasn't been growing. But higher prices encourage increased production. This means more supply, pushing down the equilibrium price (demand being constant or increasing slower than the supply increase). That's how it works in the long run anyway. Of course in the long run, we'll be dead.

Anyway, I have gas at $2.25 in my budget in my spreadsheet for long term prices (in 2006 dollars). It is an extremely small expense in my budget so I'm not really worried about it. Just my 0.02 gallon's worth!

[FinanceDude]

Quote:

Originally Posted by justin True enough, today's price is around what it was 25 years ago adjusted for inflation. But the price 25 years ago was also a high point. Gas prices since then have been lower in real terms up until the last couple of years. The nominal price of gas was lower during almost all of the 1980's and 1990's than it was at the peak price in 1981 (or even the average for all of 1981). I could be wrong, but I don't understand why gas was "worth" around a buck or so a gallon for 20 years, and all of a sudden it is now worth triple that price. I know the inputs are much more expensive and refinery capacity hasn't been growing. But higher prices encourage increased production. This means more supply, pushing down the equilibrium price (demand being constant or increasing slower than the supply increase). That's how it works in the long run anyway. Of course in the long run, we'll be dead. Anyway, I have gas at $2.25 in my budget in my spreadsheet for long term prices (in 2006 dollars). It is an extremely small expense in my budget so I'm not really worried about it. Just my 0.02 gallon's worth!

I think the oil companies are testing the "upper limit" of what they can charge to the consumer. I hear the same BS all the time, about which oil rig is going to be blown away in a hurricane that never happens, etc. It's all B.S.

Supply and demand isn't a pure play in oil prices, because you have collusive cartels involved. If there was a GLOBAL agreement on how much oil was produced, you would see more stability, but that's isn't going to happen.

My theory: IF the Middle East had little or no oil, who wouldd eal with them??

[Sam]

Quote:

Originally Posted by justin But higher prices encourage increased production. This means more supply, pushing down the equilibrium price (demand being constant or increasing slower than the supply increase). That's how it works in the long run anyway. Of course in the long run, we'll be dead.

I don't know either. I suspect there's a secret game going on, and only the privileged are invited to play.

What I do know is that crude oil is not a renewable resource and at this consumption rate, we'll run out of oil before this century ends. If the US relaxes its regulations, we could resume nuclear powers and lessen our dependence on oil. But may be that is not in the best interest for the nation in the long term. May be we should continue to depend on oil, save and collect even more uranium. When oil runs out, we'd become the next middle east dictating uranium price at will.

[MasterBlaster]

Quote:

Originally Posted by justin True enough, today's price is around what it was 25 years ago adjusted for inflation. But the price 25 years ago was also a high point. Gas prices since then have been lower in real terms up until the last couple of years. The nominal price of gas was lower during almost all of the 1980's and 1990's than it was at the peak price in 1981 (or even the average for all of 1981). I could be wrong, but I don't understand why gas was "worth" around a buck or so a gallon for 20 years, and all of a sudden it is now worth triple that price. I know the inputs are much more expensive and refinery capacity hasn't been growing. But higher prices encourage increased production. This means more supply, pushing down the equilibrium price (demand being constant or increasing slower than the supply increase). That's how it works in the long run anyway. Of course in the long run, we'll be dead. Anyway, I have gas at $2.25 in my budget in my spreadsheet for long term prices (in 2006 dollars). It is an extremely small expense in my budget so I'm not really worried about it. Just my 0.02 gallon's worth!

Higher prices do indeed bring more exploration for new oil, the building of new refineries etc.

What you missed is that these processes take on the order of 10 years or more to bring to market. The oil industry is not a light switch that by turning up the price you get more gasoline the next day.

regarding higher gas prices. It's not just the gas that you personally need. It's the higher priced gas that your whole supply chain needs that will cost you. Have you factored that into your spreadsheet ? However you cut it, higher gas and oil related prices mean that we are poorer.

[Telly]

mmmm Hubberts Peak. Marion King Hubbert. Oil industry guy that after many years went to academia. Method of predicting oil production, and why. He predicted US peak production as being in the 70's. He was right. There was a very good book written about him, and his methods. If I find the title and author again I'll post it. The book had great coverage of recovery methods, pros and cons of each, and the rate of discovery of new production methods.

One of the big points of the book was not "how much oil is still out there", but rather that the production of a field drops after 50% of the available oil has been recovered. The next 25% is very expensive and slow. The last 25% is unworkable. So total oil that still exists in the world is not the critical factor, but is instead rounding over the top of the curve.

Also, Arab oil state governments have magically "boosted" their supposed oil reserves, skewing numbers on oil left.

Oil Sands - best called "tar sands" as yakers did, as that is more appropriate. T. Boone Pickens laughed and corrected an interviewer who was talking about "Tar Sands". Pickens said "call'em OIL sands! People can't be hearin' that Boone Pickens bought TAR!!!