No one can tell when prices will "peak"...only this: if we see prices so high, the Asians can't buy, THEN we will see it decline. But this ain't gonna happen. We are sending oodles of money to Asia so the price bid up will be in their favor, not ours.
And here are some graphs you might like, Calculated Risk!
For the record, I paid $2.62/gallon for regular unleaded this morning in Studio City, CA. They're going to need some extra 3s for the premium signs soon. I'm actually cheering on the rise in gas prices, as it's the only thing that might effect some conservation. That, and I drive an economy car, and gas is a tiny part of my budget. Every time I hear an SUV driver moan about the price of gas, I get a warm feeling in my heart.
Is the opposite true? (That is, if demand drops even a little bit, prices will also plunge because the oil supply is inelastic.) Surely it is simpler to lower production (letting some capacity go idle) than boost it.
I understand that opec failed spectacularly to control oil prices in the 70s. But the end is now in sight. Wouldn't the smart oil countries just sit tight on their supply and wait for the prices to go up as they inevitably will?
The gas price increase is in part due to devaluation of the dollar.
Since dollar has depreciated by abou 40%, the oil producing countries have to make up for the loss.
I seriously doubt the extent of the influence of china or other countries having extra demand for oil in the recent past that could have affected the prices.
battlepanda, you are correct - the suppliers could just hold back production if demand dropped. Would suppliers be ABLE to hold back supply? That is always interesting.
My guess is demand will stay strong until the US economy weakens.
madhu, I agree that the drop in the dollar has played a role in the rise in gas prices. But I think most of the price increase is due to the increase in demand since suppliers are pumping at close to capacity.
I just posted on oil markets contrasting the very good material from David Altig v. some utter nonsense from - you guessed it - the NRO. Yes, this DOE report is a lot better than either Lawrence Kudlow or even CNN's Kathleen Hayes.
Alistair: Don't let the feeling get too warm. Before long, the SUV drivers (and those who could not afford a better car than a 20-year old gas-guzzler last time they bought one) will cut back on other consumption, and that may ripple back to your source of income and health care insurance quicker than you think. If not to yours specifically, then surely to somebody's.
cm: I come from a part of the world where gasoline costs considerably more than it does in the US, and people seem to manage. I made the choice to purchase a vehicle that consumes fewer resources. I can't feel too sorry for people who chose to waste. As I think a slowdown in consumption in the US is ultimately a good thing, I'm hoping that an increase in gasoline prices will have just that effect. I only hope that Americans will figure out that the course they're sailing on leads to ruin before it's too late to turn around.
madhu, I agree that the drop in the dollar has played a role in the rise in gas prices. But I think most of the price increase is due to the increase in demand since suppliers are pumping at close to capacity.
Then go to page 4 there is a chart of oil prices in euros & dollers super-imposed... a WHOLE LOT of the dollar price increase in oil is due to the dollar falling... or at least is 'confounded' with the dollar falling vs the euro...
Clearly you can see from the chart the cost of oil is going up for 'all'... but far more so in dollars... there is some serious dollar-euro-oil arbitrage going on...
Alistair: Where I'm coming from too, but those are smaller places (which comes with its own set of challenges), and many people move shorter distances. I'm not holding my breath w.r.t. to the general public's insights, but I hope as well; I try to hope without gloating though.
No one can tell when prices will "peak"...only this: if we see prices so high, the Asians can't buy, THEN we will see it decline. But this ain't gonna happen. We are sending oodles of money to Asia so the price bid up will be in their favor, not ours.
And here are some graphs you might like, Calculated Risk!
Argentina before the crash
Sigh...oil...heh...climbing the mountain..
For the record, I paid $2.62/gallon for regular unleaded this morning in Studio City, CA. They're going to need some extra 3s for the premium signs soon. I'm actually cheering on the rise in gas prices, as it's the only thing that might effect some conservation. That, and I drive an economy car, and gas is a tiny part of my budget. Every time I hear an SUV driver moan about the price of gas, I get a warm feeling in my heart.
Is the opposite true? (That is, if demand drops even a little bit, prices will also plunge because the oil supply is inelastic.) Surely it is simpler to lower production (letting some capacity go idle) than boost it.
I understand that opec failed spectacularly to control oil prices in the 70s. But the end is now in sight. Wouldn't the smart oil countries just sit tight on their supply and wait for the prices to go up as they inevitably will?
The gas price increase is in part due to devaluation of the dollar.
Since dollar has depreciated by abou 40%, the oil producing countries have to make up for the loss.
I seriously doubt the extent of the influence of china or other countries having extra demand for oil in the recent past that could have affected the prices.
battlepanda, you are correct - the suppliers could just hold back production if demand dropped. Would suppliers be ABLE to hold back supply? That is always interesting.
This is an excellent discussion on OPEC:
The Unofficial Paul Krugman Web Page
My guess is demand will stay strong until the US economy weakens.
madhu, I agree that the drop in the dollar has played a role in the rise in gas prices. But I think most of the price increase is due to the increase in demand since suppliers are pumping at close to capacity.
Regards to all!
I just posted on oil markets contrasting the very good material from David Altig v. some utter nonsense from - you guessed it - the NRO. Yes, this DOE report is a lot better than either Lawrence Kudlow or even CNN's Kathleen Hayes.
Alistair: Don't let the feeling get too warm. Before long, the SUV drivers (and those who could not afford a better car than a 20-year old gas-guzzler last time they bought one) will cut back on other consumption, and that may ripple back to your source of income and health care insurance quicker than you think. If not to yours specifically, then surely to somebody's.
Yeah, they will cut back: not pay the landlord, not pay for fixing Jr's teeth, etc.
Well, we will all end up toothless and on the street but that is OK if you have your Excursion. Big enough to live in like a king...sort of.
cm: I come from a part of the world where gasoline costs considerably more than it does in the US, and people seem to manage. I made the choice to purchase a vehicle that consumes fewer resources. I can't feel too sorry for people who chose to waste. As I think a slowdown in consumption in the US is ultimately a good thing, I'm hoping that an increase in gasoline prices will have just that effect. I only hope that Americans will figure out that the course they're sailing on leads to ruin before it's too late to turn around.
madhu, I agree that the drop in the dollar has played a role in the rise in gas prices. But I think most of the price increase is due to the increase in demand since suppliers are pumping at close to capacity.
Go to this pdf file
Then go to page 4 there is a chart of oil prices in euros & dollers super-imposed... a WHOLE LOT of the dollar price increase in oil is due to the dollar falling... or at least is 'confounded' with the dollar falling vs the euro...
Clearly you can see from the chart the cost of oil is going up for 'all'... but far more so in dollars... there is some serious dollar-euro-oil arbitrage going on...
Alistair: Where I'm coming from too, but those are smaller places (which comes with its own set of challenges), and many people move shorter distances. I'm not holding my breath w.r.t. to the general public's insights, but I hope as well; I try to hope without gloating though.