A quick observation on oil prices.
This time last year, crude oil cost $81 per barrel and threatened to crack the $85 threshold. As 2008 began, oil temporarily touched the psychological barrier of $100 per barrel; soon, the $100 mark lost any novelty value, and we became accustomed to oil above $125.
Yesterday, the markets lost 6 – 9 % of their value on the heels of Congress’s failure to pass a bailout bill. This ringing non-encouragement to Wall Street — and thereby the U.S. economy — sent the price of crude tumbling by more than $10 per barrel. And even then, oil still stood at more than $96. (It came back up to $100 today as markets rebounded somewhat.)
My point: after a decline in market speculation that took $30 out of the price of a barrel of oil over the summer, and after the Dow Jones Industrial Average’s worst point-loss ever took out another $10, oil was still higher than we could fathom a year ago, and stratospherically higher than it was a couple of years ago.
Now, maybe oil will decline still further — some experts think so. But look at this chart, which is easy to understand even at low resolution:
The jagged line shows the progression of oil prices since 1 January 2000. The red line is $90, and the heavy black line just above it is $100.
Look at aaaaalll that time, in the early years of this decade, when $90 oil would have rocked the world’s markets and upset everything we thought we knew. Imagine all the earlier decades that aren’t even shown on this chart.
Yet this morning, when I checked oil prices like I always do, I found myself saying, “Down in the $90s? That’s low.”
I’m not claiming it’s a breakthrough insight. But sometimes it’s worth it to pause and reflect upon the recent history we’ve seen, and think about what it might imply in the years to come.
~
(Barrels picture by XcBiker; chart derived from Energy Information Administration figures.)
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I’ve noticed gas prices are going down a few cents every day or so, causing me to only spend $10 or $20 per fill at the pump in anticipation of cheaper prices next week. Do you think prices will drop below $3 again? I wonder, if many people are doing the same thing that I am, could that also be effecting gas prices?
I haven’t really had the time to do much research, if any, on the gas price trends, studies, etc. so maybe you have some knowledge on this?
CP — Gasoline prices are connected heavily to crude-oil prices, but with a considerable timelag, plus other effects related to refining capacity. Short version: it’s *complicated*, even for specialists (which I’m not).
Some people do try to game gas prices, but my raw guess is that this doesn’t have a profound effect. For a lot of commercial drivers & ordinary people with long commutes, there’s not that much flexibility in when they fuel up. Overall, gas prices are likeliest to be reacting to (1) crude prices, (2) seasonal driving patterns (more driving is typically done in the summer), and (3) macroeconomics. At the moment, all three of these are favoring lower gas prices.
But no, I don’t expect gas to fall below $3/gallon — not soon, anyway, and maybe not ever.