Saturday, October 22, 2011

My prediction on fuel prices (March 11, 2008)

Current mood: argumentative

In 1981, the car I was driving was a ratty looking 1972 Opel station wagon, the first wheels I could truly call my own. That summer, the speedometer cable broke, rendering the odometer useless. As I recall, the fuel gauge somewhat worked, but wasn't reliable.

This resulted in two things: I got real good at listening to the engine to figure out both vehicle speed and miles per gallon, and I began keeping a written log of fuel purchases. It worked: Despite my youthful heavy foot, I neither got a ticket nor ran out of gas. Six cars and 27 years later, though, I still log every purchase. I also still have every log. Someday I may key all this in.

What else came of that, though, was having a running database of fuel prices. Long before Trilby Lundberg came along, I got good at tracking, and predicting, the price of gasoline. Now that the Internet and everyone's wonderfully informative blogs are here (thank especially Oily Cassandra and ChristianTM), I think I can safely predict where the price of fuel is going: Up! (yawn, big surprise there!) Really, though, I'm going to go out on a limb and make honest predictions. As I write, mid-grade unleaded is about $3.25/gallon here in suburban Pittsburgh. I do not shop on price, and do not drive all over to get a better price. Four out of five purchases are made at the filling station at the corner on nearby McKnight, and have been since I moved here 17 years ago. I always buy 89-octane mid-grade, since every car I've ever had since the Opel pings on 87 octane.

Without further ado -- and these are the Pittsburgh 89-octane prices:
$3.50 - by May 1, 2008, start of the summer driving season.
$3.75 - by September 8, 2008, end of the summer driving season
Less than $3.50 again - by November 4, 2008, Election Day.
$4.00 - by March 11, 2009, one year from today.
$5.00 - by Labor Day weekend 2009.
$6.00 - by Labor Day weekend 2010.

I'm not really willing to stick my neck out beyond that. Something else is going to happen, not sure what. A conventional war. A nuclear war. A society changing terrorist attack. Another oil embargo. Major influence from the new Iranian International Petroleum Exchange. Destabilization of the dollar. Some sort of refining crisis, like post-Katrina, when we had plenty of oil, but limited refining capacity.

I will say that we will see $10/gallon before the 2012 presidential election, and $20/gallon before the decade of the 2010s is done. The problem with saying that is that inflation speeds these along, in a positive feedback loop.

It is hard to convince people that last autumn's even $3/gallon is really the same as the $2/gallon they were paying a couple of years ago, factoring in inflation, or that the roughly 80 cents a gallon they were paying in 1997 was actually half the roughly 60-cent price they were paying in 1977. I can tell you, though, that everyone surely recognized in 1977 (when I first started driving) was double what they were paying barely five or six years before.

Anyway, enough. The predictions are what matter. I will post updates to this, probably with bulletins, as either the time or the price thresholds are reached.


Totally off-topic: What I'm listening to: The music of the 1920s and 1930s on Radio Dismuke. MySpace doesn't hook in Internet Radio very cleanly.


bus15237 said...

Gasoline hit $4/gallon in mid-2008, just as I predicted, then dropped back, just as I predicted. I was less right about 2009 and 2010, though it has returned to $4 once since then. Some cool links in this post, too, which still work!

bus15237 said...

Comments on the original 2008 post:

Myself, Apr 18, 2008 1:11 PM Update to my prediction on fuel prices
Remember this blog from a couple of weeks ago? I predicted $3.50/gallon for mid-grade before May 1.

The station I use bumped its price for mid-grade today to $3.55(9)/gallon. And we're still a couple weeks away from May 1.

I'm still sticking with $3.75 before Labor Day. With $114/bbl for crude and a sagging dollar, I'm confident that that prediction will hold, too.

Then let's see what shenanigans John McCain and his pals can pull to bring the price back under $3.50 by November 4, the better to swing the election to the GOP side, like was done in 2004 and 2000.

bus15237 said...

Some comments from the original 2008 MySpace post:

I said gas prices would hit $4/gallon, and they did. OK, so they didn't hit my predicted $5 by Labor Day. I guess we can all be thankful. But they are certainly going to be below $3.50 before Election Day, like I said. Here in The 'Burgh, two weeks before the election, mid-grade self-serve is about $3.10 right now.

Will we be back to $4 by March 11, 2009? I don't know, but I am certain it will be a lot higher than it is now. Refining capacity has not changed. What we're driving has not changed. Driving habits have not changed much. The only major thing is a worldwide recession that drove down the price of crude. As soon as the world economy turns around, crude will jump again, and so then will the price at the pump.

Yeah, I will go out on a limb. $4 by March '09, $5 by September 2010, just what I said in the original blog.

I hate being right.

We hit $4/gallon for mid-grade over Memorial Day weekend, 2008. That's almost 10 months ahead of schedule! I'm wrong in the wrong direction! I'm being too conservative!

Revised prediction: $5/gallon by Labor Day weekend 2008 (not 2009), $6 by Memorial Day weekend 2009.

In a later blog, I suggested $6.75/gallon for a flat price, just like I likewise suggested, in August 2005, $4 for that flat price. At the current rate of increase, we will be at $6.75 by Labor Day 2009 without such a tax.

Again, we need stability. Fix the price high but stable, then vary the tax, shrinking it as the underlying price rises. At a fixed trigger point, re-bump the tax, and the price, to restabilize the price.

$3.75 by Memorial Day instead of Labor Day. I was being conservative back on March 11. Eight weeks later, I'm way ahead of schedule.

Mid-grade hit $3.55(9)/gallon today after holding at $3.45(9) for several weeks. No climb, just a 10-cent jump. So my first prediction was spot-on.

Meanwhile, John McCain announced in Pittsburgh a couple days ago that he wants to eliminate the 18-cent/gallon federal gasoline tax during the summer driving season. What good is that going to do? Duh! Those taxes are needed to fund needed highway maintenance. Election year posturing and empty promises, that's all that is. "Popular" does not equate to "Brilliant".

I'm not that much into predictions either, but I'm pretty sure we'll see $4 per gallon before July 4, 2008. The reality of emence demand for a commodity with finite supply is finally hitting the main stream. Warren Buffet admitted our peak oil reality on CNBC last week. President Bush has eluded to it several times in the past month or so. The Pentagon, GAO, many in Congress, Shell Oil, CACI, Defense Department, and a sleu of others have all been telling those who care to listen that depletion of oil fields is real, and demand is outstripping supply. As the cost to suck oil out of the Earth goes up, so will the price at the pump.

I used to get bulletins saying that gas is way too expensive and to boycott this gas station, or don't buy gas on this day. I took the time to reply to each and every one of them to explain how supply and demand work. I've only seen two such bulletins in the past few months. I think people get it much more now than they did just a year or two ago.