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  1. #1
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    Gas to drop to $1.15?

    Why $1.15 Gas Isn't A Fantasy

    Sure, it sounds far-fetched, but the pieces are starting to fall into place for what could be a dramatic drop in oil prices over the next few years.

    Remember when you paid $1.15 a gallon for gasoline?

    You could be paying it again. Maybe not this year, but perhaps in the next few years.

    Sure, oil experts say there's little excess refining capacity. Oil reserves are stretched. Oil consumption is soaring in China and India.

    But things are starting to change. Drivers are changing their habits. Global tensions are easing, and more supply is on its way.

    Crude oil zoomed to nearly $80 a barrel this summer as traders fretted about waning supplies and two big potential problems: tensions over Iran's nuclear research program and Katrina-style hurricanes threatening oil production in the Gulf of Mexico.

    To keep prices moving ever higher, traders needed -- and frequently got Ė a steady stream of bad news. "It was like you needed a fifth of booze a day to keep the buzz going," says Peter Beutel of Cameron Hanover, a Connecticut energy consulting firm.

    But prices began falling a month ago when it became clear hurricane season wouldn't be anything like last year. Oil traders have come to sense, too, that all the saber rattling over Iran was dissipating. "We got everyone leaning the wrong way," Beutel said.

    (In fact, a big hedge fund was forced to tell its investors this week that it would be taking a huge loss because it bet the wrong way on natural gas.)

    Result: The spot price of crude oil closed at $63.23 a barrel in New York on Thursday, down nearly 18% from a peak of $77.03 a barrel on July 14. Crude rallied slightly on Friday and Monday.

    AAA says the national average price of gasoline is $2.495 a gallon, down nearly 17% from peaks in August, and there are some communities in Missouri where it has fallen under $2 a gallon. Prices should moderate further in the coming weeks because the summer driving season is over.

    The oil price break has forced everyone in the energy business to take a hard look at how much lower prices could fall. A lot lower, says Philip Verleger, a noted energy consultant who was a lone voice several years ago in warning that oil prices would soar. Indeed, he told McClatchy Newspapers last week, "All the hurricane flags are flying" in oil markets.

    If everything falls into place, crude could drop perhaps even to $15 a barrel, Verleger says. And then, he says, you would see gasoline at $1.15. Here's how that could occur.

    Oil and gasoline inventories continue to grow.
    They've been building up all over the world as users and refiners have scrambled to ensure enough supply in case, say, the Strait of Hormuz in the Persian Gulf is shut down. Tankers from Iran, Saudi Arabia, Kuwait, Iraq and Gulf oil producing countries must pass through the strait to bring crude oil to the rest of the world.
    The weather cooperates.
    On top of a hurricane with few threats to the oil and gas fields in the Gulf of Mexico, weather cooperation means a warm winter like the winter of 2005-2006. That would drop demand for heating oil, a key heating source especially on the East Coast and in Europe. And that would create excess supplies of crude that refiners could use to make gasoline.
    Tensions in the Middle East continue to ease.
    This assumes conflicts between Israel and Hezbollah in Lebanon tail off and that Iran and the rest of the world come to an agreement over Iran's nuclear program. (Admittedly, the latter is a reason why the scenario could fall apart.)
    Drivers take the bus.
    There is anecdotal evidence that U.S. drivers are finding other ways to get around with gas prices above $3. The big question is if they will they climb back behind the wheel as prices drop.

    Those four pieces are just the start. Beutel thinks two more catalysts are starting to emerge.

    1. At current prices, Beutel says, "you can drill a lot of dry holes before you give up on a field." And so, drawn by the potentially huge profits, energy companies are finally starting to make plans to drill for more oil.

    Example: the Jack 2 field in the Gulf of Mexico now being developed by Chevron (CVX, news, msgs), Devon Energy (DVN, news, msgs) and Norway's Statoil (STO, news, msgs). While the field is 7,000 feet under water and another 20,000 feet under the ocean floor, it's also huge. One report suggested it could boost current U.S. reserves by 50%.

    Cambridge Energy Research Associates says some 360 additional drilling projects are now under way and global supplies could grow by some 25% by 2015.

    2. Beutel thinks buyers are already demanding more fuel-efficient vehicles. "They're not buying SUVs," he says.

    Not now anyway. But donít write the Hummerís obituary just yet. Beutel thinks that, at some point, prices will drop so low that Americans will get complacent and start driving big gas-guzzlers again. And the cycle will turn.

    -- Charley Blaine

  2. #2
    Sophomoric Member Roody's Avatar
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    But things are starting to change. Drivers are changing their habits. Global tensions are easing, and more supply is on its way.
    What bizarro world is this report from?

    The only reason drivers are changing their habits is because oil is so dear.

    And I won't even comment on the stupidity of the next sentence.


    "Think Outside the Cage"

  3. #3
    Senior Member cranky's Avatar
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    If we keep burning all that oil, the weather won't cooperate.

  4. #4
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    Quote Originally Posted by Blue Order
    Why $1.15 Gas Isn't A Fantasy

    Sure, it sounds far-fetched, but the pieces are starting to fall into place for what could be a dramatic drop in oil prices over the next few years.

    Remember when you paid $1.15 a gallon for gasoline?

    You could be paying it again. Maybe not this year, but perhaps in the next few years.
    In order for this to happen, gas prices will have to continue to drop even during the summer driving period next year. If prices drop during the summer season, it will be a first and not likely to happen.

    I think we are seeing a reduction in price due to a correction in market speculation but don't expect this to last too long. Billions were made and the motorist paid for it dearly. Furthermore, the costs associated with driving a motorcar have not dropped. The high price of insurance, monthly payments, tolls, tickets, maintenance have remained the same or increased. It's these main costs and not just the price of petrol that have made driving a luxury.

    If the price of gas were to drop to $1.15 a gallon or less, I would still remain car free.

  5. #5
    Burn-em Upus Icephaltus Gojohnnygo.'s Avatar
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    If it does drop $1.15 thats what big oil wants. They want you driving around and in a SUV so they can jack the price to $4.00 a gallon. Who knows what price. All I know they are FF'en up the world with war and are Planet.

    Big oil dropped the price of crude oil in the late 70's for reason they stole all the oil investments from wall street and we became to dam good at conserving. This time thats not going to happen. We have China and India ramping up their use at an alarming rate(Plus some third world countries). Crude oil this time next year will be $90.00 a barrel if not more. If we have a very cold winter god help us.
    Sick BubbleGum

  6. #6
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    Even if this is true, would we really give up our bikes or the lifestyle we enjoy?? I say not.

  7. #7
    CARFREE, THE LIFE FOR ME Autokat's Avatar
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    I have no doubt this probably will happen .. over here in oz fuel has dropped in the last month from $1.35 a litre to $1.05 and it hasen't gone back up .....yet
    I'm not myself today. Maybe I'm you.
    SPEED P8

  8. #8
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    Quote Originally Posted by travelinhobo
    Even if this is true, would we really give up our bikes or the lifestyle we enjoy?? I say not.
    Nope, it's not about the price of oil, it's about what we're doing to our world...

  9. #9
    meep! legot73's Avatar
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    There's an election coming up that decides party majority votes in the US Senate. Is it possible that the lack of bad news and pessimistic speculation are to maintain the status quo, at least until the Senate is in pocket? People are pretty fired up to vote when they're p*ssed off, but $2/gal might keep some content.
    Nothing says "in good times and in bad" like a good pair of fenders

  10. #10
    Bammmm! baomo's Avatar
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    ^ thats what i'm thinking

  11. #11
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    Bush's poll numbers are up to a 44% approval rating, partly due to lower gas prices, and partly due to his two week effort to push his agenda. Now that you mention the political angle, and seeing the new poll numbers, I wouldn't be surprised if we were to learn that this "story" was written to maintain the status quo.

  12. #12
    Mad scientist w/a wrench
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    I doubt we'll see exactly this...seeing as this outcome is contingent upon 4 hard to control things happening, I think murphy's law will nix this.

    It is an interesting hypothesis however, to contemplate what would happen if, in a manner of speaking, the world "burnt out" on energy consumption...what would happen if FUD regarding peak oil went too far and the world actually ran into an energy surplus?

    That said, I'm not counting on it.
    Proudly wearing kit that doesn't match my frame color (or itself) since 2006.

  13. #13
    Senior Member Ziemas's Avatar
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    How does this effect carfree people? Are you expecting a drop in consumer prices due to lower transport costs? Where's the connection?

  14. #14
    Dare to be weird!
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    Quote Originally Posted by Ziemas
    How does this effect carfree people? Are you expecting a drop in consumer prices due to lower transport costs? Where's the connection?
    Low fuel prices would likely help avoid a deep worldwide economic recession, which would start in the U.S. and then spread to other countries that maintain balance of trade surpluses with the U.S.

  15. #15
    Senior Member Ziemas's Avatar
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    Quote Originally Posted by Platy
    Low fuel prices would likely help avoid a deep worldwide economic recession, which would start in the U.S. and then spread to other countries that maintain balance of trade surpluses with the U.S.
    What's the connection to living carfree?

  16. #16
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    Quote Originally Posted by legot73
    There's an election coming up that decides party majority votes in the US Senate. Is it possible that the lack of bad news and pessimistic speculation are to maintain the status quo, at least until the Senate is in pocket? People are pretty fired up to vote when they're p*ssed off, but $2/gal might keep some content.
    The smart money IMHO is o
    this scenario. Bushco is scared that the
    crippled democrats might still make
    like a blind pig and steal an acorn,
    (the congress) and that would put
    a crimp in their plans for world domination.
    Ned Goudy, Glendora, CA USA
    Lightning Thunderbolt, Easy Racer EZ1, Rhoades Car
    http://www.rhoadescar.com/4w1p-j.jpg

  17. #17
    Senior Member mister's Avatar
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    Quote Originally Posted by Ziemas
    How does this effect carfree people?
    That's what I was thinking. It's almost like telling a paraplegic (sp?) that running shoes are going to have a dramatic drop in prices.

    And before you guys get all fired up, I'm not saying being car-free is a handicap. I envy those who are truly car free.
    Brilliant!

  18. #18
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    Quote Originally Posted by Blue Order[b
    Tensions in the Middle East continue to ease.[/b]
    Sure, it's all looking plenty rosy over there right now, nothing like continuing the momentum currently going in their geopolitical world!

  19. #19
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    Yeah, I think the Pope managed to settle things down pretty well in the Middle East. Yessir.

    No way gas is going < 2 bills.

  20. #20
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    I think a couple well-thought-out cartoons would get everybody in a better mood.

  21. #21
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    Quote Originally Posted by Ziemas
    How does this effect carfree people? Are you expecting a drop in consumer prices due to lower transport costs? Where's the connection?
    The drop in consumer motor oil will have no benefit to those who are car free. My lightrail pass and monthly train ticket will not go down and neither will groceries, clothing etc. Public transportation over many years are effected by raises in fuel prices but this is rather minimal and to be expected. The government agencies do not pass on the fuel savings to the riders.

    At the same time, rising fuel prices were not passed onto the commuting public. My lightrail pass is the same price as it was four years ago and did not go either up or down. This is why the motorist on the forum where upset when I posted that my transportation costs were not effect by the rising costs of fuel over the summer. They assured me my transportation, food and housing costs were going to skyrocket and that we better hope for low fuel prices. It didn't happen.

    On the other hand, the motorist actually benefits from lower prices.

  22. #22
    meep! legot73's Avatar
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    Quote Originally Posted by Ziemas
    What's the connection to living carfree?
    For individuals that choose carfree for pure economic reasons, its obvious.

    For individuals who choose carfree as lifestyle regardless of economics, its a little less obvious:

    • You may see low energy prices raise consumer confidence, increasing investment in some employment sectors, etc.
    • You may find a great new job, only to lose it if the low prices are temporary.
    • You might see Hummer sales pick up again at $1.15/gallon, which indirectly affects your safety and the environment's.
    • You might see the tolerance for cyclists diminish with the "cheap" fuel available (i.e. "gas is cheap again, why don't you just drive?").
    • You might see municipal investment in pulic transit systems decline, or be delayed.
    • You might see exurban sprawl gain momentum, taking money away from the cites and beginning a cycle of decay.
    • You might find that you need to travel to these exurbs for your job, which assumes you provide your own rapid transit.
    • You might see lipservice energy policies that keep the masses content, while oil profiteering continues.

    Those are a few I can think of.
    Nothing says "in good times and in bad" like a good pair of fenders

  23. #23
    Life is short Ride hard
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    I think everyone is coming off of a summer time high. I think as soon as election gets passed the high is going to wear off. Gas will go through the roof something will blow up in a big scale Iran will step up what it is doing. Global Warming will rear it's ugly head the penguins will be famished. Bird flu will come up anthrax might roll out from under the bed. On top of that Your aunt suzie will fall of a latter, and break her leg. Life will suck for you till next summer then you get high again till the next november election it just seems to be media drible, and babble
    The Ferrari ('05 Bianchi Forza) had a flat (Stupid Glass) the Japanese wagon ('77 Nishiki with Arkel Utility Basket) was in the body shop (On my bench being repainted...repent ye rust)
    so I took the SUV ( Cannondale V2000 Active 100SL)

  24. #24
    Senior Member chicbicyclist's Avatar
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    Well, as Americans flock to inner cities, the car will start to become a liability. Doesnt need high gas prices to convince some to at least ditch automobile ownership.

  25. #25
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    Keep in mind that a significant part of North America's oil production is non-conventional (read expensive). If oil drops too much, supply that is economical to produce will go way down. The oil sands depend on oil at $30/barrel to make any profit. Anything below that and billions of dollars go up in smoke. Ditto for drilling in war zones, deep wells in the gulf, etc. Oil production may indeed increase, but only on the back of a higher price. If we see gas at $1.15 a gallon again in the US, it won't be for long...

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