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 (ian.umces.edu/imagelibrary/)

Read more »