How long will it really take for gas prices to double?

I recently read a NY Times article that can be found here:
www.nytimes.com...

The article states:

Higher prices have done little to suppress global demand or attract new production, and the resulting mismatch has sent oil prices ever higher.

That has translated into more pain at the pump, with gasoline setting a fresh record of $3.60 a gallon nationwide on Monday. Experts expect prices above $4 a gallon this summer, and one analyst recently predicted that gasoline could reach $7 in the next four years.

But after doing some reading up and some general research into oil prices, I found something interesting..

This is a wikipedia link which talks about oil price ups and downs from 2004-now.
en.wikipedia.org...

This chart, from wikipedia, depicts oil prices, per barrel, from 1996-now.
upload.wikimedia.org...
The latest trend in 2008 has been insane. On January 2, 2008 oil reached $100/barrel. On May 5, 2008 Oil reached $120/barrel. As many of you probably already know, in about a 4 months timeframe oil climbed an amazing additional $20/barrel. Now, I am not an economist or financial expert, but this data is pretty interesting.

First, let's look at the geopolitical scenario.. We have a war in Iraq that has no end in sight, we have Iran building a nuclear weapon and already threatening to use it, We have a global food crisis that is affecting nations all over the world and we have oil companies globally making record profits. As the price of oil continues to rise, the global food situation will continue to degrade (we all know this) just because oil prices are the major cause of the food crisis. The question is when will it really affect us here in America. It already is in a way since Costco and Sam's Club are already rationing rice (of all things. See article below)
news.yahoo.com...

This shocking trend in price seems to have no end in sight for these 2 basic reasons:
1-Supply cannot meet the global demand, especially as places like the Middle East, India, and China continue to develop and have ever-increasing energy demand.
2-The geo-political situation does not seem to show any sign of calming down which could, potentially, finally lower oil prices.

Considering this, let's paint a hypothetical scenario. Oil did raise $20/barrel between january2 and May5. That is about a 4 month timeframe. If we project that trend, how long would it take until gas really reaches $7/gallon just as it talks about in the NY times article? The article states that the experts project 4 years for this to happen. But is that accurate? All the expert economic projections I have seen are ALL different and all of these opinions are subject to varying analyses' of historical data and geopolitics. However, all the projections in the media seem to indicate global demand continuing..

From the NY Times article..

At the same time, oil consumption keeps expanding. Global consumption is forecast to increase by 1.2 million barrels a day this year, to 87.2 million barrels a day, with much of the growth in demand coming from China, India and the Middle East, according to the International Energy Agency, a group that advises industrialized countries.

In the United States and through much of the developed world, the higher fuel prices have led drivers to reduce their consumption, and gasoline demand is expected to drop this year. But that drop will be more than offset by the rise in energy demand from developing countries. In the next two decades, demand is projected to jump by 35 percent, and developing countries will consume more oil than industrialized countries.

For gas to really reach $7/gallon that would mean gas would need to be around double what it is now. That means oil would need to be around double what it is now also (around $240/barrel). $120 increase divided by $20 equals 6. This means that you would need six 4-month periods of this trend continuing. So, basically, this means that a $7 gallon of gas could be a reality within 2 years if the current trend continues (not 4 as the article states).

Meanwhile we have an administration in office which has done nothing to decrease our dependance on oil at all (let alone foreign oil). Nothing has been done to initiate anything resembling an alternative energy movement in this country even though we have the technology and resources to make it a reality. Nothing has been done to ensure that, if an alternative energy movement does take place and we develop viable alternatives, these alternative energy companies can compete with big oil. Bush promised clean burning coal plants when he ran for office in 2000 and nothing has been done on that end either.

What this all means is that we have nothing preventing our economy from going under altogether in the case oil and gas prices really do reach double what it is now (at least not yet). Given that the scale of this ongoing global food crisis, we should be acting now to ensure our economic survivability in the case worse comes to worse. I'm not even sure it's possible to save our economy now in the case that were to happen, however, we still have time to take some kind of action to fend off what could be an all out crisis in our country and around the world. But nothing has been done despite the rising price of oil and the uncertainty of our future.

What will happen to our economy once the economies of other nations, already hard-hit with the food crisis, begin to collapse? Doesn't our economy also depend on a healthy global economy for stability? I don't think anyone really knows what will happen but there isn't really anything I see that looks optimistic for our economy and the average U.S. citizen. We just got stimulus checks from the government but those are all going to pay for gas and everything else that is price-hiked because of the price of gas. People think it is bad now but this coming crisis currently looks inevitable. It's just a matter of how bad it's going to get and I honestly don't think anyone knows how bad it will really get. Everything that the experts project is simply an educated guess. We have a right to be concerned do we not?

-ChriS






[edit on 7-5-2008 by BlasteR]

[edit on 7-5-2008 by BlasteR]

[edit on 7-5-2008 by BlasteR]

[edit on 7-5-2008 by BlasteR]

Do you think the oil running out theme is a myth or reality? I have read two totally different takes on this. One says we have enough oil to last another, say 500 years, even with current projections, another one says that we could be on the verge of no more oil in 50 years. So, do you think the "oil crisis" is real or made up? If it's real, then most definitely we need to do something like NOW to have any chance of surviving and economic collapse. If the crisis is made up, then I doubt it would matter how much we consume or conserve. I really have no idea what the truth is or might be, but I do know the who oil thing is the most ridiculous thing I've ever known. Oil prices keep going up, everyone complaining, even the big oil companies, yet they are making great profits still. It's all controlled and manipulated in my opinion. If we conserver, we would have to do it as a nation to really hurt the oil companies, otherwise if we just "kind of" conserve they will still win. For example, if you sell 100 barrels at $50 a barrel then fine, BUT if they can talk us into conserving just a little, all the while the prices keep on going up, then they can sell 50 barrels at $100 a barrel and still make the same money. There's no crisis or shortage or even refinement limitation, in my opinion. If there is a refinement limitation, it's because they've kept it that way. it's easy economics. Would you like to work half as much as you do now and make the same money or maybe even more? Maybe I'm just too into conspiracies, but I feel like it's all manipulated by our current gov. Look at the prices since Bush got into office. Also, they have JACKED up the price of diesel like crazy. Diesel used to cost like 3/4 of the cheapest gas, at most about ten years ago. Currently, it's costs MORE than premium in lots of the country. Someone is totally screwing our truckers! Let's just hope whoever takes office next will actually not be too involved in oil money like Cheney is. Well, I've just rambled enough now, sorry if I got off the topic a little....


JPT

Great post, some good points there.

I think $120 per barrel is actually quite cheap compared to where it can go from here. Another conflict in the Middle East, ie, Iran, and then it'll shoot up a bit more. Some countries think the US dollar is even devaluing their oil.

Will it all collapse? Of course it will. All economies will decay unless the whole energy system is changed. Peak oil or not, the stuff is going to run out sooner rather than later.

China's oil use for instance is phenomenal, they'll want to secure their supply however they can.

I couldn't put a time frame on it, but just look at the oil price - it has almost double in about a year or so. I hear that someone predicted $200 per barrel, and I think that's completely feasible, even without any new Middle East conflict. Some people scoff at the idea, but people also scoffed at $100 per barrel, and now that's fell to the wayside of wishful thinking.

I'm buying vespa stock. This gas price crisis shows no signs of slowing. I wouldn't own a big suv for all the tea in china. 55 bucks to fill my gs400 ulev. And I only got 89. I usually go for 93. It's insanity. And we occupy the second leading gas producer. Insanity.

reply to post by BlasteR


I think the one expert is not that far off.
I get a doubeling of the oil price in 3 and a half year by extrapolating the trend that started in 2003/2004.




Price grow usually follows an exponential curve rather than a linear one.
Therefore such an extrapolation is better done with a logarithmic scale where the exponential grow becoms a stright line.

At the moment oil increases stronger than the 2003/2004 trend.
If the grow falls back to the 2003/2004 trend which I expect then we can expect the double in 3 and a half year.

If however the old trend breaks and the much stronger grow started 2007,2008 becomes a new trend we could be there in 1 and a half year.



I follow the oil price a little and I still don't see anything that really supports the much stronger grow for a longer time.
Oil corrected down to sharp from the 2003/2004 trend and now it is correcting up to sharp looks like the usual game of overdoeing everything like on the stock market.

As I see it we are facing peak oil (artificial or not doesnt play a role) or slideing flat through it since the last few years. The most oil suppliers have a decreaseing in production year after year.

In the latest numbers I saw a production grows in Irak (a very strong one) and Russia.
This is just enough to hold the level today. But it will not be for the further years to come. Iraq's production is still not at the level before the war but will be in the next 1 or 2 years seeing the production grow numbers. I am not aware of the planes how far they can push the production higher than that old level in considerable no time becasue that would be required.

Originally posted by mattguy404
Great post, some good points there.

I think $120 per barrel is actually quite cheap compared to where it can go from here. Another conflict in the Middle East, ie, Iran, and then it'll shoot up a bit more. Some countries think the US dollar is even devaluing their oil.

Will it all collapse? Of course it will. All economies will decay unless the whole energy system is changed. Peak oil or not, the stuff is going to run out sooner rather than later.

China's oil use for instance is phenomenal, they'll want to secure their supply however they can.

I couldn't put a time frame on it, but just look at the oil price - it has almost double in about a year or so. I hear that someone predicted $200 per barrel, and I think that's completely feasible, even without any new Middle East conflict. Some people scoff at the idea, but people also scoffed at $100 per barrel, and now that's fell to the wayside of wishful thinking.

Thanks. I completely agree that $120 is nothing compraed to what it will eventually be. Over the last 4 months alone the price of oil has increased by $20 per barrel. If you project that out you have us gettting in a really bad situation really soon (aside from doubling the price of oil in 2 yrs not 4).

-ChriS

Personally, I think that what would happen first, if the situation degrades, is that economies in other countries would start to collapse. The global economic effects of those collapses would be huge.

It almost seems the Bush administration is already backing the american people into a corner. What will happen now? What will happen when gas really does reach $7 a gallon regardless of when? The price rise may eventually slow but the geopolitical situation is not getting better. The supply is not going to meet the demand anytime soon according to the NY Times. What we are left with is a big question mark and no way of knowing if our country will even make it, let alone whether or not we will have an alternative energy movement before oil kills us all (or lack thereof).

So far alternative energy isn't panning out and as long as oil companies are making record profits they really don't care either.

Gas is higher than I ever thought to could be.Dad going to build a still for his cars . Bush should take the oil from the alska pipeline and keep it coming lower the prices. Get are boys back from Iraq let them do what they have bin doing for the last 6000 years.

What we should do is tap the resources we have in the U.S. and become self-sufficient while an alternative energy movement begins to give us hope that it can eventually take over completely. Nothing has been done on either front.

Rush Limbaugh was talking this morning on his show saying things like "We have the resources to create our own oil"!! As if that is somehow a secret. I just thought "you're an idiot", while he was saying it over and over as if to use it as a stab at liberals. Pretty ridiculous. (Not to change the subject). I just thought.. Yeah you go ahead and live in your little delusional dream world "knowing" that oil prices will rise and the situation will get better. Meanwhile all the facts are pointing in the other direction and oil prices will continue to rise as they still do today. It's not just liberals or conservatives paying the higher prices for EVERYTHING (not to mention gas).. It is everyone in this country. But somehow Rush sees it as a means for wacky liberal doomsdayers to paint doom and gloom. STUPID!

This entire concept of sending the oil down the pipeline, shipping it out, refining it in the lower 48 and then shipping it back up is counter-productive simply because the entire process is more expensive due to the price of oil, then we pay even higher prices for gas when it does finally make it's way north again.. Meanwhile we in Alaska still pay some of the highest prices in the union despite an immense oil market in this state and an IMMENSE supply of, as yet, untapped oil.

Rush Limbaugh was also talking this morning about how, in his opinion, it is only the liberals getting all freaked out about the price of oil as if it is some kind of false doom and gloom leftist concept. This is reality..Oil has risen 20 dollars a barrel in 4 months. Supply simply isn't meeting demand and won't for the foreseeable future. Meanwhile , as the NY times states, Demand is increasing globally from countries like India and China.

We all know that basic economics involves ups and downs. The problem that Rush Limbaugh fails to recognize is that the current price-hike trend is going to continue for the foreseeable future because oil prices are decided by
A-The geopolitical situation (Which isn't good and will only get worse due to the global food crisis, iran building and threatening to use nuclear weapons, etc..etc..)
B-Supply cannot meet demand and will not for the foreseeable future..

We reserve the right, as americans, to be concerned. Especially since food rationing has already begun in this country and probably will continue as the food crisis situation continues to degrade..

-ChriS

[edit on 8-5-2008 by BlasteR]

[edit on 8-5-2008 by BlasteR]