Gasoline prices have declined from the $4 plus/gallon we had earlier in the summer. How long will they stay down though?
Daryl Guppy, CEO of Guppytraders.com claims that oil might drop all the way to $48/barrel if it manages to break $58 in the near future.
Demand is certainly dropping due to the high prices we experienced over the summer. According to an Associated Press article, Americans drove 5.6% less than a year ago, the biggest decline since statistics started being kept in 1942.
Demand is only half the picture, however. Supply is the other half and OPEC is doing what they can to tighten supplies. On Friday, in an attempt to slow declining oil prices, OPEC cut supplies by 1.5 million barrels per day. These cuts usually take a few weeks to impact prices, not to mention that member countries of OPEC don’t always fully comply with the cuts.
According to the Wall Street Journal, J.P. Morgan forecasts that oil will balance around $79/barrel by the end of this year and $70/barrel into next year. That should put gasoline somewhere around $2.25/gallon, but it seems at time there is no rhyme or reason to the prices.
As long as demand stays low, we shouldn’t see the huge spike in gasoline prices we suffered through this summer. But if the economy starts to rebound and demand increases, we will see the prices rise once again.
Posted under Spending
Written by Matt on October 27, 2008
