Tuesday, December 9, 2008

Could Gas Prices Be Heading Below A Dollar?

gas pricesIt was only a few months ago when Americans were swearing off SUVs and the press was clamoring about how the world was going to have to get used to sky high oil prices, because this time they were hear to stay. How things can change in such a short period of time. No that gas prices have dropped below $2 dollars a gallon Americans are dusting off their SUVs and the talk is now about how oil is going to fall further. Tim Iacono from The Mess That Greenspan Made talks about one report that suggusts gas prices might even fall below $1 in his blog post below. Now wouldn't that be something?

The pendulum has swung quite far for gasoline prices - so far, that this popular sign for $4.00+ a gallon gas is equally applicable to current prices that, in some parts of the country, appear to be headed toward $1.00 a gallon.

Seeing the leading number "1" at gas stations in recent weeks (yes, even out here in California) has been strange enough and has led to a noticeable increase in the number of Hummers out on the road.

But, some are now predicting a more unusual leading number - zero.

Gasoline below one dollar a gallon?

According to this report in the LA Times, it could be here before you know it.
Pump prices headed toward five-year lows nationally and in California, the Energy Department said Monday. And despite a bump in crude prices, some analysts say the slide might not end until oil hits $25 a barrel and gasoline drops to $1 a gallon or below.
"The world has changed. I don't see any reason why $1 gasoline isn't possible, and $25-a-barrel oil is not out of the question," said Phil Flynn, vice president and senior market analyst for the Alaron Trading Corp. in Chicago. "I don't think the downside is over. There is a lot of surplus oil out there."

But Fadel Gheit, senior energy analyst for Oppenheimer and Co., is one of the analysts saying that oil won't stay down, even if the historic price drop isn't quite over yet.

"Some of the same clowns who were predicting $200-a-barrel oil a few months ago are in the crowd predicting $25 a barrel. But just as we believed that oil above $100 was not sustainable by market fundamentals, oil below $30 isn't sustainable either," Gheit said.
I wonder if Phil Flynn realizes that Fadel Gheit may have just called him a "clown".

The national average retail price is about $1.70 a gallon at the moment, about 10 cents higher in California. Maybe I ought to dust off that SUV Fill Up Index that was last updated when gasoline was $4.50 a gallon last summer.

This article has been reposted from The Mess That Greenspan Made. The full post can also be viewed on The Mess That Greenspan Made.

1 comment:

Anonymous said...

Looks like we are finding a short term bottom right now, but this is all temporary. As the dollar pulls back and inflation takes hold, we will over shoot to the upside on crude...AGAIN! And the vicious cycle will continue.

Great blog. I just found you and subscribed.