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Gas prices coming down in 2008? December 31, 2007

Posted by Ron Warnick in Businesses, Road trips.
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Maybe so. This seems to go against the conventional wisdom that gasoline prices will keep inching upward.

But an report last week by the Christian Science Monitor indicates that the price at the pump may fall modestly in the fast-coming year.

Even if the winter is somewhat colder, the energy markets may have a greater supply of oil next year. Through much of this year, OPEC production has been about 1 million barrels per day lower than expected, says John Felmy, chief economist at the American Petroleum Institute, a trade group in Washington. But he adds, “I have heard that Saudi Arabia is now pumping an extra 400,000 barrels of oil per day, so we’ll have to see if that continues.”

In fact, supply could outstrip demand next year, says Kevin Lindemer, an energy analyst at Global Insight in Lexington, Mass. This year, oil production was about 85 million barrels per day, barely enough to satisfy demand of about 85.7 million barrels per day. “Next year, we’re probably closer to supplies of 87 million or 88 million barrels per day,” he estimates.

Some of the new supply will come from Saudi Arabia, which is opening up another oil field, says Antoine Halff, an energy analyst at Fimat USA, an energy trading company in New York. “We see more production coming onstream next year, more rebuilding of spare capacity that will put some flexibility into the system,” he says.

Spare capacity will also come from non-OPEC sources, says Mueller. “There are a number of big projects coming onstream in the US Gulf of Mexico, Brazil, Russia, and Kazakhstan,” he says.

Energy supplies will be further augmented by an increase in biofuels. In 2007, EIA estimates, ethanol has been equal to 4.3 percent of the total gasoline pool. “We should be ramping up to 9 billion gallons of biofuels, up from 6 [billion] to 7 billion gallons right now,” says Mr. Felmy.

Those are compelling reasons on why prices should slide. Obviously, this scenario would be good for Route 66 businesses, which see a modest impact when fuel prices rise.

However, the Nervous Nellies in the markets tend to overreact to anything in the world stage. If the Middle East continues to be unstable, prices could ignore all those sensible reasons to drop the price of oil.

Comments»

1. Harley and Annabelle - December 31, 2007

HAPPY NEW YEAR Ron!
Thanks for all the great coverage and stories in regards to “The Mother Road” Route 66 in `07. Keep up the good work and have a Great year in `08!!!
Your friends, Harley and Annabelle

2. chrisu - May 15, 2008

I think you were right $3.75 for a gallon its coming down

3. Anonymous - May 21, 2008

There’s no excuse why they need to charge so much for that crap. They are making a good living when it’s cheap for cunsumers, so leave it at that.


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