Gas... The law of supply and demand...

[SCW-Greg]

I know many of us have been forecasting gasoline prices to keep creeping from $4 to 5, and beyond. Much of this based on inflation, increasing (global) demand, dwindling resource access, etc.

But now this, lest we forget the laws of supply and demand, gas in Oregon and Washington has fallen nearly 50 cents in the last 3 weeks. Now they say the hurricane has also put downward pressure on prices (except for those right in the thick of it). All of this is based on reduced demand. AAA is also forecasting price trends through the holidays down to $3.25 on this same premise.

We may find the Model S makes a big dent in this, if not directly at the pump, but maybe psyche too.

The only wild card we don't know about then is global (China and India) consumption trends. Will those countries see our push to EV as a trend they want to follow sooner than later too?

Thoughts on U.S. and global demand affect on long term gas prices?

 

[Doug_G]

Gas prices will continue to rise, and will also get more and more volatile. It's the wild swings that wil do more damage to the economy.

 

[richkae]

Short term demand or supply spikes will continue to make gas prices very volatile. The trend remains up.

This a chart I made about a year ago projecting regional world consumption from the past trends.
( Up to 2010 is from EIA data, 2011 on is projection. )

In the future, the influence of US demand on world prices diminishes every year, and demand from Asia becomes dominant.

 

[SCW-Greg]

Nice chart Rich. Though I think your growth rate forecasts out past 2018 is too steep. I would start to look for a slowing or leveling off around 7 to 10 years from now.

 

[hcsharp]

...
Thoughts on U.S. and global demand affect on long term gas prices?

I looked in my crystal ball and saw this: Gas prices will follow the general rate of inflation or possibly fall slightly, although with some volatility. Current prices already reflect the expected pressures from global consumption and dwindling supplies. I think investors over-reacted to these things and drove the price up too high. Increases in global demand will be offset by better technology and lower priced competing fuels. Natural gas, for example, is what powers most EVs and will create downward price pressure. I also think most buyers view the current price as too high and have responded by cutting back their use. There is so much momentum in the gas market that this takes a while to become evident. As for dwindling supply, that's happening pretty slowly and is partially offset by newer extraction methods that enable more oil to be produced. Now you've heard my totally seat-of-the-pants opinion based on no research whatsoever.

 

[richkae]

Nice chart Rich. Though I think your growth rate forecasts out past 2018 is too steep. I would start to look for a slowing or leveling off around 7 to 10 years from now.

I agree. I should have said that the projections on the right side were simple math based on the left side with no consideration of the supply side and how it might constrain consumption.

 

[strider]

I'm expecting a massive bout of deflation to hit as the piper still needs to be paid for the excesses of the last 30 years. That will put a damper on demand and prices will fall (much like they did in '08-'09). Once we come out the other side of that recession then prices will restart their upward climb due to peak oil, rising demand, etc. So the next few years could be very tough for Tesla but if they can make it through that they will be in a fantastic position to take advantage of the next growth cycle in a era of expensive oil.

 

[bint2k]

according to this chart i should move to Europe.

 

[vfx]

California's 16 cent price jump last May is being investigated as a false supply shortage.

West Coast gas-price spikes should be probed, senators say | Local News | The Seattle Times

But the senators say a review of California refinery-emissions data revealed inconsistencies between the time refineries were actually producing petroleum products and when maintenance shutdowns were publicly reported. They said misleading reports of shutdowns could create a perceived shortage of gasoline.