$10 a gallon?

[JaJae]

Some "experts" are predicting gas prices upwards of $10 a gallon.
Gas May Soon Cost a Sawbuck | The New York Sun

Gas May Soon Cost a Sawbuck
Big New Shock at the Pump Forecast by Two Analysts
By DAN DORFMAN, Special to the Sun | April 28, 2008

Get ready for another economic shock of major proportions — a virtual doubling of prices at the gas pump to as much as $10 a gallon.

That’s the message from a couple of analytical energy industry trackers, both of whom, based on the surging oil prices, see considerably more pain at the pump than most drivers realize.

Gasoline nationally is in an accelerated upswing, having jumped to $3.58 a gallon from $3.50 in just the past week. In some parts of the country, including New York City and the West Coast, gas is already sporting a price tag above $4 a gallon. There was a pray-in at a Chevron station in San Francisco on Friday led by a minister asking God for cheaper gas, and an Arco gas station in San Mateo, Calif., has already raised its price to a sky-high $4.62.

In Manhattan, at a Mobil gas station at York Avenue and East 61st Street, premium gas is now $4.03 a gallon. Two days ago, it was $3.96. Why such a high price? “Blame the people at STOPEC (he meant OPEC) and the oil companies,” an attendant there told me.

These increases are taking place before the all-important summer driving season, signaling even higher prices ahead.

That’s also the outlook of the Automobile Association of America. “As long as the price of crude oil stays above $100 a barrel, drivers will be forced to pay more and more at the gas pump,” a AAA spokesman, Troy Green, said.

Oil recently hit an all-time high of nearly $120 a barrel, more than double its early 2007 price of about $50 a barrel. It closed Friday at $118.52.

The forecasts calling for a jump to between $7 and $10 a gallon are based on the view that the price of crude is on its way to $200 in two to three years.

Translating this price into dollars and cents at the gas pump, one of our forecasters, the chairman of Houston-based Dune Energy, Alan Gaines, sees gas rising to $7–$8 a gallon. The other, a commodities tracker at Weiss Research in Jupiter, Fla., Sean Brodrick, projects a range of $8 to $10 a gallon.

While $7–$10 a gallon would be ground-breaking in America, these prices would not be trendsetting internationally. For example, European drivers are already shelling out $9 a gallon (which includes a $2-a-gallon tax).

Canadians are also being hit with rising gas prices. They are paying the American-dollar equivalent of $4.92 a gallon, and they’re being told to brace themselves for prices above $5.65 a gallon this summer.

OPEC warns of $200 a barrel.

Opec’s president on Monday warned oil prices could hit $200 a barrel and there would be little the cartel could do to help.

The comments made by Chakib Khelil, Algeria’s energy minister, came as oil prices hit a historic peak close to $120 a barrel, putting further pressure on global economies.

His remarks suggest Algeria wants Opec to continue to resist calls by US and European leaders for the cartel to pump more oil to help ease prices. But Mr Khelil blamed record oil prices on the weak dollar and global political insecurity.

He told El Moudjahid, Algeria’s government newspaper: “I don’t think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years.”

He added: “The prices are high due to the recession in the United States and the economic crisis, which has touched several countries, a situation that has an effect on the value of the dollar. Each time the dollar falls 1 per cent, the price of the barrel rises by $4 and of course vice versa.”

FT.com / In depth - Opec says oil could hit $200

We've been able to absorb a lot of the increased fuel costs, but can we afford this? Maybe others who are more knowledgeable about gasoline and the economy can chime in.. *cough* 6Speed *cough*. All I know is if fuel raises to $7-10 a gallon I'd need to find new work. I have a long commute use about 3 gallons a per trip.

[thewise1]

I commute 40 miles one way. If this happens, my company is going to have to let me work from home or... I dunno. I've been thinking more and more lately that it might be a good idea to buy some land where we can grow our own food and live off the land... just in case.

Reading accounts of the Great Depression will do that to you, though.

[A_C_E]

That would be the kind of Oil Shock you cover in hypothetical questions in an intro macroecon class. It would be disastrous.

Basically, the entire economy gets thrown completely out of wack. Prices on every good you can imagine shoots up, supply of goods go down, your income would go down dramatically, there would be massive layoffs, air travel would be crippled, etc.

Basically, no, we can't afford it. We'd be forced to switch to alternative sources of energy ASAP. The slower we get off oil, the longer the economic depression would be that this would cause. I'm not trying to scare anyone, it's just the reality of the situation. Oil prices that high would cause an Oil Shock. Plain and simple.

We'd get through it, but it wouldn't be easy.

[Donkey®]

We'd be fucked.

[northhunter]

So, tell me again why a strong military presence in the middle east is such a bad idea? When gas hits $4.00 a gallon how much of a demand will there be to bring our troops home? Cynical sounding I know, just my thoughts though.

[Ardentfrost]

Originally Posted by northhunter

So, tell me again why a strong military presence in the middle east is such a bad idea? When gas hits $4.00 a gallon how much of a demand will there be to bring our troops home? Cynical sounding I know, just my thoughts though.

How does us staying in the Middle East help our gas prices? Are we bringing DOWN prices by creating unrest? I'm pretty sure it's the opposite.

[thewise1]

Originally Posted by A_C_E

That would be the kind of Oil Shock you cover in hypothetical questions in an intro macroecon class. It would be disastrous.

Basically, the entire economy gets thrown completely out of wack. Prices on every good you can imagine shoots up, supply of goods go down, your income would go down dramatically, there would be massive layoffs, air travel would be crippled, etc.

Basically, no, we can't afford it. We'd be forced to switch to alternative sources of energy ASAP. The slower we get off oil, the longer the economic depression would be that this would cause. I'm not trying to scare anyone, it's just the reality of the situation. Oil prices that high would cause an Oil Shock. Plain and simple.

We'd get through it, but it wouldn't be easy.

I should probably start another thread for this, but what demographic is most shielded from the effect of this? Is it still farmers?

[Ardentfrost]

Originally Posted by A_C_E

Basically, no, we can't afford it. We'd be forced to switch to alternative sources of energy ASAP. The slower we get off oil, the longer the economic depression would be that this would cause.

The problem is it was always the expectation that oil/gas prices would continue to rise slowly over time making alternative forms of energy increasingly reasonable. Companies have been researching alternative fuels and electric-based transportation for decades now in preparation for that eventuality. No one anticipated the sudden and sharp increase in these prices 15 years ago when ideas were getting tossed around.

New technologies occur at economic shifts. The shift we're experiencing now has caught us off guard. It's not like our choices are pay $70 for a new horse or $75 for one of those new horse-less carriages. Our choice is gas. Hybrids use gas. Ethanol is just mixed with gas and its real price isn't any less than gas anyway. None of these intermediate technologies (between gas and whatever we end up with) are preventing the increase in price of gas enough to stave off the immediate need for an alternate solution.

It sucks. We need REAL solutions.

Anyway, if gas gets much higher, I may need to start taking the bus. It would reduce my one-way commute from 35 miles to 5 miles. If I still had my old jeep, I probably would already be on the bus. My Versa gets twice the mileage it used to get.

[thewise1]

Originally Posted by Ardentfrost

The problem is it was always the expectation that oil/gas prices would continue to rise slowly over time making alternative forms of energy increasingly reasonable. Companies have been researching alternative fuels and electric-based transportation for decades now in preparation for that eventuality. No one anticipated the sudden and sharp increase in these prices 15 years ago when ideas were getting tossed around.

New technologies occur at economic shifts. The shift we're experiencing now has caught us off guard. It's not like our choices are pay $70 for a new horse or $75 for one of those new horse-less carriages. Our choice is gas. Hybrids use gas. Ethanol is just mixed with gas and its real price isn't any less than gas anyway. None of these intermediate technologies (between gas and whatever we end up with) are preventing the increase in price of gas enough to stave off the immediate need for an alternate solution.

It sucks. We need REAL solutions.

Anyway, if gas gets much higher, I may need to start taking the bus. It would reduce my one-way commute from 35 miles to 5 miles. If I still had my old jeep, I probably would already be on the bus. My Versa gets twice the mileage it used to get.

Already started, myself... last august

[WickedLou9]

Even with my car getting 36mpg, 10 dollars a gallon would be devastating. I use 10-12 gallons per week. Thats about 6 grand a year. It woudln't put me out of my house but we would certainly be scraping the barrel.
Not to mention the ripple effect something like that would have on our economy.
Luckily I work for a technology centered company and we already have the infrastructure to allow people to work from home. I imagine that if gas were to reach those levels, we would see more people "telecommuting".

Oh and one more sort of anecdotal thing... There is a business around here called...I forget the full name... something Photo-Voltaics. They make solar panels. Maybe 5 years ago there were 10-12 cars in thier parking lot. Now thier lot is full and they have employees parking on the grass in front of the building.

[Ardentfrost]

Originally Posted by WickedLou9

Even with my car getting 36mpg, 10 dollars a gallon would be devastating. I use 10-12 gallons per week. Thats about 6 grand a year. It woudln't put me out of my house but we would certainly be scraping the barrel.
Not to mention the ripple effect something like that would have on our economy.
Luckily I work for a technology centered company and we already have the infrastructure to allow people to work from home. I imagine that if gas were to reach those levels, we would see more people "telecommuting".

I'm amazed at how similar our situations are.

Oh and one more sort of anecdotal thing... There is a business around here called...I forget the full name... something Photo-Voltaics. They make solar panels. Maybe 5 years ago there were 10-12 cars in thier parking lot. Now thier lot is full and they have employees parking on the grass in front of the building.

Look at the stock prices of First Solar (FSLR I think). They came out with a higher efficiency solar panel a year and a half ago and went public. Their stocks have SHOT up.

People are putting a lot of market faith in solar being a component of the eventual solution.

[A_C_E]

Originally Posted by Ardentfrost

I'm amazed at how similar our situations are.



Look at the stock prices of First Solar (FSLR I think). They came out with a higher efficiency solar panel a year and a half ago and went public. Their stocks have SHOT up.

People are putting a lot of market faith in solar being a component of the eventual solution.

You know, a number of people have said that alt. energy is going to be the next bubble, following in the footsteps of dotcom and housing.

It makes sense if the technology is really there: high demand, governmental support, bad economy. The three amigos of a bubble.

[A_C_E]

Originally Posted by thewise1

I should probably start another thread for this, but what demographic is most shielded from the effect of this? Is it still farmers?

If you're talking small-scale, farmers market style farmers, then yes, they're the most shielded. Commercial farms will get killed on transportation costs just like everyone else.

[thewise1]

Originally Posted by WickedLou9

Even with my car getting 36mpg, 10 dollars a gallon would be devastating. I use 10-12 gallons per week. Thats about 6 grand a year. It woudln't put me out of my house but we would certainly be scraping the barrel.
Not to mention the ripple effect something like that would have on our economy.
Luckily I work for a technology centered company and we already have the infrastructure to allow people to work from home. I imagine that if gas were to reach those levels, we would see more people "telecommuting".

Oh and one more sort of anecdotal thing... There is a business around here called...I forget the full name... something Photo-Voltaics. They make solar panels. Maybe 5 years ago there were 10-12 cars in thier parking lot. Now thier lot is full and they have employees parking on the grass in front of the building.

Yeah, I really hope that at $10/gallon companies will see sense and go to a telecommute paradigm instead of the situation I'm facing (We actively discourage it)

[thewise1]

Originally Posted by A_C_E

If you're talking small-scale, farmers market style farmers, then yes, they're the most shielded. Commercial farms will get killed on transportation costs just like everyone else.

Yes, I meant the small farmers that live off their own land situation

[kinggovernor]

I would think that this would reverse the follow of succuessful people out of urban areas and back towards them.

[WickedLou9]

Originally Posted by thewise1

Yeah, I really hope that at $10/gallon companies will see sense and go to a telecommute paradigm instead of the situation I'm facing (We actively discourage it)

yeah same here. We went through a short period where working from home was fine and then we got some "old school" people in higher up positions that want everyone in the office before 9 AM to put in thier 8 hours kinda thing. It's an old paradigm that I hope dies off eventually because it's irrational.

For a while I was actually told to work from home because I could get more done. I wasn't constantly bothered by people asking questions. Now that's all gone. I think if they run the risk of losing good people over the high cost of commuting they will change thier minds.

[Roonie]

I could see it hitting $10 dollars a gallon. The main reason I believe this is the world oil production has been stuck at about 85 million barrels/day for the last 2-3 years, while demand has increased beyond that level and will continue to climb. The gap has been filled by depleting above ground inventories, and in some cases by condensates from natural gas.

Though it seems tempting to point to Alaska etc, it pales in comparison to decline rates we are facing from old mature reserves; US domestic production rates peaked several years ago...it gets even worse when you look abroad; bye bye North Sea. Recently, it appears that russian oil production has also peaked. Peak oil is not so much about whether or not we have 50, 75 or 100 years of oil in the ground, but rather it is about the rate at which we consume oil, versus the rate at which we can get it out of the ground. The Energy Information Agency (the government department responsible for this kind of stuff...so this is what Bush is telling you, not someone with a communist agenda) has suggested that even if Alaska was running at peak production in 2025, the effect would be to reduce US reliance on foreign oil from 70% to 66% - hardly any difference at all. Never mind any environmental impact nor the difficulties in building a pipeline that long or pumping oil through that pipeline at freezing temperatures.

Recently, there was a mother of a discovery announced off of the coast of Brazil. The biggest single discovery in decades. The rub is that equates to about a 1 year supply of oil at current demand levels.

The most difficult culprit, in terms of finding more is the declining energy return on exploration. In the 1930's it took the equivalent amount of energy of one barrel of oil to find the equivalent of 30 barrels of oil. That has fallen consistently over the years and now, is more like a 2 to 1 payback. FWIW, the Canadian oil sands are 1.1 to 1 return on energy.

In the end, oil and gas are going to go significantly higher, and there is absolutely nothing policy makers can do about it.

A good piece about peak oil is here......


edit; it is not letting me show the link to the article about peak oil I guess beacuse it is a pdf.

[kombayn]

If it gets up to $10/gal, I'm just going to ride my bike and take the MetroLink even though it doesn't cover all parts of the city of Los Angeles. That's crazy business and people would freak out in droves, that'd mean we're in another Great Depression if we're paying $10/gal.

[thewise1]

Originally Posted by WickedLou9

yeah same here. We went through a short period where working from home was fine and then we got some "old school" people in higher up positions that want everyone in the office before 9 AM to put in thier 8 hours kinda thing. It's an old paradigm that I hope dies off eventually because it's irrational.

For a while I was actually told to work from home because I could get more done. I wasn't constantly bothered by people asking questions. Now that's all gone. I think if they run the risk of losing good people over the high cost of commuting they will change thier minds.

We justify it because our business is largely relationship based, so I don't think it'll ever change for us. They will say take the bus, manage it yourself, be a professional, etc, just like they do now. But we'll see, that might eventually change.