Gasoline could drop to $1.15 a gallon?

WOW! I think just 700 mi. up the road here in Denver, we are still in the $2.70 range.

 

I doubt that it would go that low, but it would be great if it does!

 

In Central Florida we are down to 2.49.

Since it was the Presidents fault it went up I wonder if he will get the credit for it going down.

 

We are down to 2.35 here in NC. I hope it does not drop to 1.12 just because that is not sustainable.

Oil, like all commodities has a basement price below which production becomes unprofitable. At $70 a barrel oil companies are focused on producing as much as they can and are actively looking for new sources. Here is a link to a guy drilling for oil in Louisiana in his own front yard.

http://www.kplctv.com/Global/story.asp?S=5386714

Admittingly, Steve Jordon, the man in this story is an oil company CEO but the point he makes in the story is that high oil prices make wells like this feasible. It will cost him 2 million dollars to drill the well. At $70 a barrel he expects to make a profit.

At $70 a barrel exploration and new wells are going as fast as they can. This will at some point result in over production, over supply, and a price drop. At $40 a barrel new exploration still takes place and oil companies can make enough of a profit to keep pumping. At $12 a barrel existing wells become unprofitable and end up being capped off and new exploration stops. That of course eventualy results in underproduction, shortages, and price increases.

If the price of crude oil drops that low it will set up another cycle of shortages in the future. $12 a barrel and $70 a barrel are both unsustainable in a free market. What should happen is that oil stabilizes around $40-50 a barrel.

 

This all sounds nice but what you and others do not explain is that you are talking about todays dollar. 30 years ago that 70$ went a whole lot farther for exploration than today. For example; 30 years ago the average factory worker in my area made about 3.00$ an hour. Today that same worker doing the same job makes about 4 times that amount, yet his dollar doesn't buy as much now as it did then.

So your 'sustainable' prices mean nothing. One must account for inflation.

 

That is true, you must account for inflation. $40 a barrel oil at today's dollar is sustainable and should give us pump prices in the 1.50 to1.60 range. It will go up with general inflation.

 

In east Houston, where all the refineries are located, gas can be found for $1.99/gal.

In NW Houston, where I live, it is going for around $2.25/gal.

I can remember one time during Clinton's era that gas in NW Houston was $0.89/gal. I doubt we ever see that again.

I'd be pleased to pay anything less than about $1.65/gal.

 

The Saudis want Bush to stay in control.

 

And the terrorists want the dems in control.

(but I digress)

 

If burglars cleaned out your house, would you give them credit for bringing some of it back later?

 

Oh good grief!:BangHead:

 

Oops. Forgot the Rev. thinks that Bush's contributors have purchased the right to gouge us.

We should be grateful that they aren't gouging us as badly a short time ago, I suppose...:love2:

 

random musings:

THe big find in the Gulf of Mexico won't be explored if prices go below around $60, from what the stories said several days ago.

"Experts" were saying $5 per gallon just a month or so ago. The doomsday prophets were wrong--it would stand to reason that the $1.15 crowd is probably overshooting the runway also.

It shows how much the prices is based on fear. The Hezbollah and Iran situations are maybe a weeeeee less tense (or at least not more tense) in the court of public opinion. Hurricane season, despite all the forecasts, has been a complete wash-out (thankfully). The "fear quotient" subsided, and so did prices.

 

There ain't no gouging going on.

 

The oil industry has always been a series of booms and busts. It wouldn't surprised me to see oil drop to $20 per barrel before the end of 2010 and gasoline in the low $1.00 range.

Of course, downstream profits(at the gasoline pump) for oil companies can remain the same at that price but the upstream end of the business(at the wellhead) would be hurting big time.

Here's another article talking about such a potential steep drop:

"Historically, once a price spike has ended, oil has overshot on the downside.It's very instructive to look back at the 1970s and 1980s using inflation-adjusted prices.

In 1970, oil was trading at less than $18 a barrel (in today's dollars). In 1980, the price peaked above $89. By 1985, the price had fallen to around $50 a barrel.

But that wasn't the end of the decline. Between 1986 and 1999, oil traded for less than $30 a barrel in 12 of those 14 years. And as recently as 1998 and 1999, the price of oil was below $20 a barrel.

I'm not saying that the Middle East will stabilize and the price of oil will plummet to $20. But the range of possible prices is far greater than one might expect."

- http://tinyurl.com/j4rab

 

If I was a betting man, and I'm not, I'd bet the farm it won't.

And there is no gouging goin on.

 

The only way you can say for sure about gouging is if the gap between the wholesale and retail price of gas gets bigger. And it has. A lot bigger. Does this mean that "big oil" is responsible?

No, it doesn't. The record profits of oil companies are just a matter of taking advantage of circumstances. The gouging seems to be entirely at the retail level.

Not that the oil companies are wringing their hands about it, of course...

 

There is no gouging, unless it's by an isolated gasoline station, at the retail level. It's never been proven to exist because it doesn't exist.

The crack spread on the NYMEX has dropped recently to less than $2.00/bbl.(or to less than $.05/gal.)

The huge profits by the integrated oil companies have taken place mainly on the upstream end, not the downstream end of the business.