Gas Price Update
The recent drop in prices at the pump could pick up steam, driving gasoline sharply lower in coming months, USA Today reported Wednesday.
'We'll be closer to $2 than $3 come Thanksgiving,' Fred Rozell, a gas analyst at at the Oil Price Information Service, told the newspaper.
If that happens, prices will be inconsistent with a trend that started back in 1999.
Even if the current price spike is an anomaly, my highly complicated projection models--OK, I'm just eyeballing it--project prices to be in the $2.50 range into early 2007. That's not to say we can't have prices below the trend, just that if that happens, prices will be, well, below the trend (just as current prices seem to be above the trend started in late 1998 or early 1999).
How does the Oil Price Information Service explain the expected price drop?
Several factors are behind the recent declines: the end of the summer driving season, which reduces consumer demand for gasoline...
Woohoo, DRIVE LESS! works!*
...as well as, the end of seasonal federal requirements on gas that makes the cost of importing and refining it cheaper, the newspaper reported.
Overall gas consumption is down for the year, which takes the edge off wholesalers prices, who in turn are trying to get rid of the product.
Woohoo, DRIVE LESS! works!* Sorry, did I already say that?
Finally, petroleum traders, worried that high prices won't last, are anxious to sell their holdings, the newspaper reported.
Damned speculators...Oh wait, we can only blame them for higher prices, right?
I have one more explanation, regression to the mean.
*For those new to Env-Econ, "Drive Less!" is an answer to the question "What can we as consumers do to bring down the price of gas?" "Drive Less!" places the burden on drivers to take action. Gas prices are high because drivers are willing to pay high gas prices. "Drive Less!" and gas prices will fall.
The upward trend began about the same time that we invaded Iraq. My model says that prices won't come down until we leave and the risk of a middle east supply shock goes down (assuming that things are calm in the middle east when it is time for us to leave).
Posted by: John | August 30, 2006 at 10:51 AM
Gee, ya think (sarc)?
Funny thing is, almost any econometric model would identify the break in about April 99. Could econometric models be wrong? Say it ain't so.
Posted by: Tim Haab | August 30, 2006 at 11:03 AM
If the break was in April 99, that must have been when Bill Clinton invade Iraq.
Posted by: tom | August 30, 2006 at 12:22 PM
I'm ignorant on this ... do those models allow for multiple breaks? Eyeballing the graph, prices go up and down and then take off in 2003.
Posted by: John Whitehead | August 30, 2006 at 06:41 PM
How many breaks do you want?
I would bet that you could identify one or two. One in 1999 and/or one in 2002. Tell me the result you want and I'll get it for you.
Posted by: Tim Haab | August 30, 2006 at 08:49 PM
Tim,
Did you take a nasty pill?
John
Posted by: John Whitehead | August 30, 2006 at 09:30 PM
I was trying to be funny and say something telling about econometrics at the same time. Guess it didn't come out that way? Sorry.
Posted by: Tim Haab | August 30, 2006 at 11:41 PM
No problem. I understood what you were doing but it may not have come across that way. Sometimes the goofy emoticons help ;->
Wait a sec, is this mike on? Oops, I feel like Kyra Phillips right now.
Posted by: John | August 31, 2006 at 08:35 AM
The funniest part of the Phillips thing is now she has to family gatherings after calling her sister-in-law a 'control freak' on national TV.
Posted by: Tim Haab | August 31, 2006 at 11:00 AM
"Tell me the result you want and I'll get it for you."
How about gas for $1.00 per gallon?
;)
Posted by: Mark | September 01, 2006 at 03:58 PM
In an ongoing effort to learn more and do something about gas prices and energy related issues, not only locally but globally as well, I would like to share an energy related resource I have ran accross at Gas prices at energylord.com
Posted by: Jillian Rogers | June 12, 2007 at 07:07 PM