How far will gas prices fall?

[Team Canada]

Well, a huge part of it is oil falling back to $65, but my guess is demand has also contracted as people changed their driving habits.

[igor67]

The gas price drop has in many way out paced the demand drop sharply in terms of percentages. Which does lend strong support to the notion that oil demand has been very inelastic. Which is economic speak for demand not responding quickly to changes in price. The reverse of that is that to compensate for relatively modest demand contractions (a few percentage points) the price has to drop a lot. It's certainly nice to fill up for $10-15 dollars less each time, but the big one I think in terms of stimulus is going to be as the diesel prices drop back down what kind of relief that will give to all sorts of business and governments.

[mothershipconnection]

It's certainly nice to fill up for $10-15 dollars less each time, but the big one I think in terms of stimulus

 

Because I have to commute a ridiculous distance to work every day, relative to July prices, I'm functionally getting a $2,500 raise because of decreased fuel costs. That's about 3X the rosiest of campaign tax cut promises.

[RyDogg66]

I'm defiinately not an expert on economics, so what is the reason prices are falling like this?

I quit my job a few months ago because of gas prices (well, that was one reason). I was putting up 800 miles a week, now I walk to work. There are many people like me I suppose who changed their lifestyle due to gas prices. The only thing I hope is that people dont forget and start insane commutes again.

 

Because I have to commute a ridiculous distance to work every day, relative to July prices, I'm functionally getting a $2,500 raise because of decreased fuel costs. That's about 3X the rosiest of campaign tax cut promises.

Yeah I was putting in about $50.00 into my tank 5 times every two weeks. Doing the math, by simply quitting my job my salary goes up $6,500.00. If I can get rid of my car all together, which I bought specifically for the commute, I could shave off another $4,000 a year in car payments/insurance.

[splitterpfj]

We'll have to wait and see how long oil holds at this price level, and how long demand remains repressed, but I could see gas getting as low as $1.80 if things stay as they are.

 

Oil demand has contracted sharply, worldwide, as economies have come under stress. When's the last time you saw OPEC announce a massive decrease in production, only to see oil prices fall again, as though no one heard a word they said?

 

This is tremendously good news for our own economy, gas is down about $1.75 a gallon from its peak right now, even if you've adjusted your lifestyle to drive less, imagine how much more cash that will allow you to use for other things.

[TooLiveBrew]

I didn't see anyone else comment on this (sorry if I missed it), but am I the only one that remembers gas prices steadily falling heading into the 2004 elections? I 100% know I'm not making this up as a 'seemed like...'. Happened in 2004, and has happened again in 2008.

[Fatter than Joey]

I suspect that gas prices drop every fall....

[PlayerHader]

Not over 50% in a few months.

 

I've heard that, "Wait until after the election" theory before. At the risk of getting too political for this board, how do people correlate an upcoming election with gas prices dropping? Just a brief response will suffice, as I don't want to see this thread closed down.

[Fatter than Joey]

I dont think that the election has much to do with it -- more that less people are traveling.

[Fatter than Joey]

Click here to see the gas prices over the last 6 years. They generally dip in the fall.

[Invader3K]

I had heard on the radio that since the Olympics, China's demand for oil has drastically declined. That is probably helping to cause gas prices to fall.

[JoeH33]

I just drove down to Mississippi last weekend and saw a few gas stations with sub $2.00 gas in Missouri and Arkansas.

[PlayerHader]

Click here to see the gas prices over the last 6 years. They generally dip in the fall.

 

I didn't mean to argue this point at all. There is no doubt that after the summer driving season that gas prices fall each year. They don't fall by 50%, though. Igor's post is spot on. A very small drop in demand in oil has a powerful effect on the market. It is important to remember that the US economy is not alone in its struggles. The world economy is sluggish.

 

There were predictions over the summer that China's Olympic preparations were driving demand as well, so as Invader pointed out, that might also have a great effect on the current slide. Gas prices certainly slide each fall, but this isn't a part of the typical cycle right now. The market is adjusting and correcting itself in several ways.

[Schlitz001]

I just came on here to brag that I paid $1.19 a gallon for gas. Granted it was in Wyoming where the tax on gas is lower, but it was still exciting to tank up for just over $20. The other nice part of this is that I get paid $0.55/mile for driving and I drive 2,000 - 4,000 a month for business. The tragically ironic part of this all is that I work in the Oil and Gas industry and my job is suddenly in jeopardy due to a major reduction in domestic drilling for 2009.

 

[nate82]

I'm defiinately not an expert on economics, so what is the reason prices are falling like this?

Supply and demand. Demand is low for gasoline and when demand goes down supply increases. When demand decreases prices go down. When demand increases or supply decreases prices rise. That is the simplistic explanation why they are falling like this.

[LouisEly]

The reason gas prices shot up so much was because of speculators investing in the commodities market. With the stock market (at that time) flat for several years and the housing market dropping, one of the few things that was steadily increasing in price was oil. So the investment houses and hedge funds started buying up oil contracts, and that artificially shot up the price of oil. I had head that at one point an investment group in northern Europe held 11% of all oil contracts. Just like the stock market in the late 90s and the housing market in the early 2000s, prices were artificially inflated due to over-investing. Well, when gas got so expensive it had such an effect on the economy (inflation and consumer spending, not to mention public outcry) that the government stepped in and said they were going to start investigating the trading of oil futures. When that happened, many investors got spooked and dumped their oil contracts, thus beginning and the major reason for the drop in oil. Yes, some people changed jobs/driving habits, but that effect has been minimal because it's not like people are driving 50% less than they used to. Layoffs, and people not driving to work at all, probably has had a bigger impact. And I'm sure China is buying far less. What's going on now is that with the drop in the stock market, these investment houses need money to shore up other positions and losses so they need to sell assets - thus more pressure to sell oil contracts, and thus why prices are still dropping.

 

The weird and scary thing is that gas prices have dropped so much and it has not boosted the stock market at all... usually those two things are inversely related.

[pitchleague]

woohoo! Gas is finally below $2.00 here in Arizona! Took long enough.

[ewizabeff]

I got gas for $1.79 last night...full tank for $20!

[craigharmann]

$1.63 at Sam's Club in San Antonio

[BrewCrewForever]

I got gas for $1.79 last night...full tank for $20!

Same here. It is a great feeling when $20 fills your tank up. I love it.

[Patrick425]

I know FTJ posted a link to this chart earlier. However, I was looking at the 6 year gas prices this morning and noticed that they have not been this low in Milwaukee since December of 2004.

 

http://images.yuku.com/image/bmp/1e425599d27e6fb29cb114661b045c5ae4ef85a.bmp