The Peak Oil Crisis: Gasoline Prices Revisited

It has been 18 months since we all worried very much about high oil prices. Starting in July 2008 gasoline prices took an historic plunge dropping from a U.S. average high of $4.11 a gallon all the way down to $1.70 in January 2009.

In retrospect this price drop was a good thing for it did more to slow the downward spiraling recession than most people realized. In the last 12 months however, the situation has reversed and the average price for gasoline is pushing $2.80 a gallon. An increasing number of commentators are starting to talk of the return of $100 oil and $3+ gasoline.

The problem of course is by now everybody knows gasoline prices always rise in the winter and spring leading to a peak around June. In 2008 and 2009 we had unusually large increases with average gasoline prices going up $1.20 a gallon in 2008 and 90 cents a gallon in 2009. These increases, however, took place under unusual circumstances and as yet there is no reason to believe that we will see gasoline pushing $4 a gallon again this summer. In fact some are arguing the case that gasoline prices are currently too high and will be going down shortly.

There are numerous factors that will affect the balance of forces determining gasoline prices six months from now – the economic situation in the OECD nations, the pace of economic growth in China, India, and several other Asian countries, the stability of the U.S. dollar, the weather, stability of Iran, and perhaps even an OPEC decision to increase oil production if prices get too high.

Falls Church News-Press