As it seems I have no “normal” hobbies, I tend to do a lot of reading about the financial markets (finance, commodities, stocks) and I feel safe saying most people have no clue just how low gas has potential to get in the next few months. While this low will be temporary, you still will be surprised.
Essentially, the bottom has fallen out of the entire commodities market. Metals, Oil, Natural Gas and Agricultures are falling as if people will never need to drive, build or eat again. For example, the price of oil has fallen from almost $150 this past spring to roughly $40 this past Friday and, obviously you’ve see the price of gas at the pump fall too. All of this can be tracked back to the recession; the “pop” of the speculation bubble and the financial melt down.
Historically there is roughly a 6-week lag between the price of oil and the price of gas at the pump. So, while oil has dropped $25 in the last month (from roughly $65 to $40) the price of gas still has more room to drop. Based on the close price of oil today ($40), one could reasonably expect to see the U.S. average for a gallon of gas to drop to around $1.35 within the next 4 to 6 weeks.
As with all things financial market related, market “corrections” tend to over swing both ways. Oil at $150 was way too high for current condition and supply (part speculation bubble) and oil falling like a rock is the correction of that bubble. Where is going to stop, no one knows… but if it continues to fall, say to the level of $20 per barrel, the U.S. could see $.99 for a gallon of gas once again.
This could change at any time – an unexpected war, production interruptions, terror attack – but as long as oil continues to fall hard, gas is going to follow.
Think I am making this up? Jan 09 Unleaded Gas Futures are now at .90