Gasoline in the $2.50 per gallon range for 2015 and possibly decades beyond

Many people ask if the imminent peak oil story is not correct then when will we pay less at the gasoline pump ? The average price of gasoline in the United States will soon be below $3 per gallon. This seems likely to hold for the next several years.

Efficiency from higher mileage and eventually more electrified cars will take decades to rollout. Increased supplies of oil and gas are getting ahead of moderated new oil and gas demand from China and India and developing countries.

On average, $75 per barrel oil means about $2.50 per gallon of gasoline in the United States. This fluctuates by state based on different taxes and California has different refinery blends.

Oil prices in the mid-80s will mean gasoline prices that are below $3. It can take some months for the prices at the pump to reflect the per barrel crude oil prices.

Financial newspaper Barrons talked about $75 per barrel oil in March, 2014. Citigroup’s head of global commodity research, Edward Morse, believes the combination of flattening consumption and rising production should mean that “the $90-a-barrel floor on the world oil price over the past few years will become a $90 ceiling. Amy Jaffe (UC Davis) believes the average price could fall below $75, based in part on her view that oil-production costs are not fixed. “Research shows that costs track oil prices and not the other way around,” she observes. As oil prices move lower, demand for drilling rigs and related equipment falls, lowering the cost of drilling.

Deepwater oil, shale oil, and oil sands are significant now and are increasing production.

There is a world total of 7,795 trillion cubic feet of natural gas which has energy equal to 1.5 trillion barrels of oil.

Credit: Jane Hawkey, Integration and Application Network, University of Maryland Center for Environmental Science (

Natural gas prices have been significantly below the price of oil equivalent since 2011 as the natural gas supply boomed past traditional demand.

Commercial trucks and ships are converting to using natural gas. There is more industrial use of natural gas. This will both reduce the future demand for oil and increase demand for natural gas.

According to Amy Jaffe, the Saudis at one point tried to get cooperation from the Russians to back off in the Middle East in return for support of the oil price. But, she says, “the Russians believed their own nonsense about peak oil” and snubbed the offer.

Future Supply

Iraq will eventually get stabilized and then its 100 billion barrels of oil will eventually get tapped at a faster rate.

Technology for oilsand recovery is improving and scaling.

There is possibility of energy breakthroughs with molten salt nuclear fission and various types of nuclear fusion but they will not be significant on a global energy scale for at least 20 years.

Future Demand

Moderate growth can mean flat demand since there is 1-2% per year improvements in efficiency. World GDP growth is about 3.0-3.5% per year now. If World growth gets to 5% or higher then that would cause energy and commodity prices to increase again.

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