Archive for August, 2011

Gas back to $2/gallon? It will be if….

…President Bachmann becomes a reality, according to her!  This is a non political forum so I’ll stick to only the question: is this possible?  Short answer: no.

It’s possible that regular unleaded gasoline will come back down to the $2.50-$3.00 range if the price of oil comes down, especially if you live in a state like NJ where gas taxes are among the lowest.  However, Bachmann gave no details on how she would get gas down to $2, only the pledge that it would happen.  Most feel this is unlikely.  This is consistent with the peak oil theory, the point at which gas supply has peaked.  In the long run, gas will not become cheaper because it’s becoming harder and harder to get.  Even optimistic forecasts say around 2020 when peak oil will occur.  [url="http://en.wikipedia.org/wiki/Peak_oil"]Here is some more reading on peak oil from wikipedia.[/url]

When oil was a nuisance to farmers drilling water wells and flowed out of the ground freely, it was cheap to make gas out of oil.  Now, companies have to drill deep in the ocean and dig out massive tar pits and separate the oil from the sand.  There are still plenty of areas where oil can flow out of the ground but using that oil will not result in a meaningful reduction in gas prices since worldwide demand is growing faster than supply.

High oil prices trickle down to high food prices and a burden on drivers.  This is one factor why financial analysts believe the chance of short term recession is about 30%.  This type of bad news is good for politicians who are willing to say what the public wants to hear even if it’s unrealistic to the point of being absurd.  Will the short term pain cleanse the petroleum burden for a new energy future?  Yes.  After all, the stone age didn’t end because they ran out of stones – they found something better.

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