The Future Is Low Gas Prices | Edmunds.com

Edmunds.com

The Future Is Low Gas Prices | Edmunds.com

A look at why gas prices have suddenly dropped, why they're likely to stay down, and why they could go even lower in the future.

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kurtamaxxxguy

Interesting, but oil production's now being cut back with many oil companies closing down wells and reducing exploration. $40 / barrel oil's highly unlikely. And keep in mind the more oil burned, the more carbon/CO2 is produced.

kyfdx

Funny... how nobody predicted $45/bbl oil.... but, now they predict that the price will stay low.

Let's be clear... no one knows where prices will be, even two years from now.

slorenzen

While the price per barrel may indeed stay "low", I can pretty much guarantee the politicos will raise gas taxes to where a gallon of petrol will climb back up.

After all, it's not your money...

texases

I work in the oil industry, and the forecast of continued 'low' prices (if low means around $50) are only going to hold for a year, maybe two. The huge increase in oil production from the US (by 3 million barrels a day over the last several years) is almost entirely due to the 'shale revolution'. While wells already drilled will stay on production, most (80% or so) shale drilling will stop by the end of this year (or the end of the drilling rig contract, whichever comes first). US production will then resume its decline, perhaps even more rapidly because shale wells decline rapidly. When will prices rise? And by how much? I sure don't know, but I wouldn't be surprised if it got to $70-$80/bbl in 3 years. Cheaper, yes, but not $50/bbl.

s197gt

the failure in your logic is that you presume that shale drilling stops permanently.

IF the price of oil goes back up shale drilling will re-start and supply will increase. also, many analysts say that as technology advances shale drilling will become less costly...

the spigot can be turned on and off. the main thing is that shale oil reserves are there for the taking and supply has increased regardless of whether the spigot is on or not.

sure, there will be price fluctuations but even billionaire saudi prince alwaleed stated the price of oil will never reach $100/barrel again.

having said that; i also believe that the price of oil will do what the speculators price it at; fundamentals be damned.

texases said:

While wells already drilled will stay on production, most (80% or so) shale drilling will stop by the end of this year (or the end of the drilling rig contract, whichever comes first). US production will then resume its decline, perhaps even more rapidly because shale wells decline rapidly.

piredon

Sucks to own a diesel at the moment. 3.35 a gallon in New York. Roughly a 50% premium over gasoline.

texases

Nope, shale drilling doesn't stop permanently, some restarts once prices rise a bit. My guess as to an equilibrium range (some shale drilling offsetting increased demand) is that $70-80 range. And the Prince may well be right, but EVERYBODY has been wrong at one time or another up until now. No reason to think he has greater insight than the rest of the industry forecasters.

The supply is NOT there if the wells aren't drilled. Doesn't work that way. And companies are shutting down 50% to 80% or more of their drilling efforts in those high-cost areas.

stever

The 7% bump in oil prices reported today translated into a big jump on the DOW today. Interesting dynamics if nothing else.

s197gt

that is definitely true; but the fundamentals won't support $100/barrel oil. (maybe they never did.)

but again, it is not a true supply/demand issue. there is too much collusion and manipulation.

texases said:

EVERYBODY has been wrong at one time or another up until now. No reason to think he has greater insight than the rest of the industry forecasters.

3travis

It's surprising that no one mentions that the price of oil is not set by supply and demand. It is set by the price of oil contracts traded on the Commodities Market. The drop in the price of oil coincides with the Dodd/Frank implantation of the restrictions of the major banks to use depositor's funds to buy commodity contracts. Thus; the five major banks recently sold their commodity trading businesses, because without their depositor's money they could only make 4 trillion dollars a year instead of the 43 trillion dollars that they were making. This information mentioned only once in a small article on MSN internet news.

stever

U.S. fuel consumption is soaring amid cheaper prices: Kemp (Reuters)

Michaell

piredon said:

Sucks to own a diesel at the moment. 3.35 a gallon in New York. Roughly a 50% premium over gasoline.

Whereas in California the price of diesel is actually less than the price of RUG .. so, it pays to own a diesel there.