Wikinvest Wire

One dollar gasoline?

Tuesday, December 09, 2008

The pendulum has swung quite far for gasoline prices over the last few months.

It now looks like 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.


Anonymous said...

Demand is up now, so I don't think we'll see anything lower than $35.

Even if we do, we won't see gasoline under $1 because such low prices will be seen as an opportunity for increased gas taxes.


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