Gas at $1.15? Some Analysts Think It’s Possible

September 19th, 2006 | by Brian Carr |

I came across an interesting article on MSN Money today that stated many analysts who “predict” the price of gasoline believe it’s not unreasonable to expect to pay $1.15 for a gallon of gas (in the U.S.) within the next couple of years. 

Unfortunately, these may be the same analyst who recently predicted $100 oil and $5 gas.

According to the article, there are four distinct reasons why cheap gas may become a reality:

  1. Oil and gasoline inventories continue to grow.
  2. The weather has cooperated.
  3. Tensions in the Middle East continue to ease.
  4. People are driving less.

If you ask me, all of these appear to be very temporary solutions to a very long term problem.  Here’s why:

  1. Oil and gasoline inventories have grown because of the exponential increase in price.  Countries and consumers are realizing that the world cannot continue to consume as much oil when the prices are this high.  It seems to me that as we ease off the record highs for oil and gas, we will see a proportionate drop in oil and gas inventories.  And when you factor in the increase in demand from China and India, it isn’t unrealistic to start to see dramatically smaller inventories around the world.
  2. So you mean to tell me that the weatherman can’t predict the weather for a week from now, but can state with relative certainty that last year’s violent hurricane season is just an anomaly?
  3. The Middle East is unstable.  It always has been, it always will be.  Therefore, this will always be factored in the price of oil, and will not allow it to fall back to levels where gas can be had on the cheap.
  4. Much as the same as inventories, drivers drove less because of the rise in prices.  If gas were to drop to $1.15, demand would be so great that the price would have nowhere to go but up.

I realize the MSN article was stating that a lot of things would have to fall into place for gasoline to drop to $1.15 per gallon.  I just think the scenario that was proposed is so far fetched that not only is $1.15 unlikely, that it’s more than likely impossible.




  1. One Response to “Gas at $1.15? Some Analysts Think It’s Possible”

  2. By sakanagai on Sep 20, 2006 | Reply

    Counter-counterpoints:

    1. Inventories will stay on the rise as long as consumption doesn’t increase beyond projected figures (if we have another mild winter, this might just happen). The driving season is over, meaning that less gasoline is expected to be used. Also, OPEC isn’t likely to cut production until oil prices get closer to the $50 per barrel mark (prices are still “high” and with signs of an economic slowdown, cutting production could adversely affect demand and drive prices even lower).

    2. The weather “cooperating” merely means that the hurricane season is milder than previously thought. Also, the Atlantic currents have developed a recognized pattern that historically makes it much more difficult for hurricanes to form. I suppose this point could be extended to say that trends could allude to another warm winter, but that would be purely speculation.

    3. Tensions are easing from what they were when oil prices spiked (Iran, then Israel). Before the Iran situation, prices were on the downfall. I believe the term “within operational risk” applies.

    4. A rise in prices affects driving habits in the long term (remember how long it took to make an impact this past summer). However, in this context, the reduced driving refers to the end of the summer driving season. True, this point is a short term issue, but steps are being taken for the long term. For example, there has been a significant push to more fuel-efficient cars (particularly hybrids) this summer, and many are taking that to heart. This should help reduce the rate at which demand increases.

Post a Comment