A Gasoline Price Drop In Our Future?

Everybody wants to blame the oil companies for $4 per gallon gas, but here is an interesting report from today's London Telegraph. A few salient points from the article:
  • Between 2004 and 2007, US oil consumption grew only 7%. Compare this to China's increase of 34%, Middle East - 25%, and Asia at 17%.

  • Those countries subsidize fuel prices, so their costs are artificially low. However, those subsidies will have to be removed or reduced in order to curtail inflation, thereby helping to reduce demand.

  • Non-OPEC oil production will increase by 600K barrels per day (bpd) over the next few months, despite decreases by Norway, Britain, and Mexico.

  • The Saudis have agreed to increase their production by 300K bpd. This was a result of President Bush's latest visit there.

There's nothing to stop a short-term run up, but in the longer haul, with a decrease in demand and an increase in supply, shouldn't we - at least theoretically - see an improvement in the price of gas? Maybe not next week or next month, but certainly over the next year or so. And hopefully to more reasonable levels, although we can probably kiss under-$2-per-gallon goodbye! (Watch the next president try to take credit for lowering gas prices!)

My point here - don't get too wrapped up in worrying that the sky is falling - there's good reason for optimism! After all, we are all corks on a rising and falling global economic sea.





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