Under $2 Gas: Enjoy It While You Can!

[lisab]

A few days ago I filled my tank. When I saw the total I thought the pump had shut off too early. Then I noticed the gallons was about what I expected. Wow, $42 dollars to fill my tank...wow.

 

[leroyjenkens]

$1.88 is the lowest in Kansas City Missouri right now. Anyone see anything lower? That's crazy low. Haven't seen that since the Clinton administration.

 

[Astronuc]

I've seen $2.539 - $2.759 / gal in our area. It depends on the brand.

$1.88 is the lowest in Kansas City Missouri right now.

I doubt we'll see prices less the $2/gal.

 

[mheslep]

I've seen $2.539 - $2.759 / gal in our area. It depends on the brand.

I doubt we'll see prices less the $2/gal.

For the last month gasoline has been been falling roughly 10 cents / week in all regions of the country. The West Coast has the most expensive gas as always, but is on trend nonetheless to hit $2 in February. The falling trend is also helped by being off season for peak driving (summer).
http://www.eia.gov/petroleum/gasdiesel/

It may be that the Saudis have a mindset where they believe they can break any other supplier based on their past history. If this is the case oil could continue to fall. The fact remains that the Saudis must export oil to make money, while US producers do not. US producers have slowed down, but not much. Of the hundreds of drilling rigs in the shale fields of Texas (now the world's 7th largest oil producer by itself), only a hand full have been retired (WSJ). In the days of sandstone reservoir drilling, apparently it was the expense of the dry hole that sank an oil driller in a down market. In shale operations, the dry hole has become rare.

 

[Astronuc]

Actually, I paid about $2.75⁹/gal last week, but this week the same station has Reg (87) at $2.69⁹. Hopefully, it'll go down a bit more before I fill up.

I think gasoline is a bit more expensive in the NE. NY has some high gasoline taxes.

 

[Czcibor]

Here's an article from October that correctly predicted the price war and argues that even if OPEC "wins" in the short term, they still lose in the long term...and that they overestimate their odds/power.

http://www.marketwatch.com/story/can-saudis-beat-north-dakota-in-an-oil-price-war-2014-10-08

And here is an update from a few days ago from the same source that says more forcefully, no, they can't.

http://www.marketwatch.com/story/opec-is-wrong-to-think-it-can-outlast-us-on-oil-prices-2014-12-02

Either way, the next few months will be an interesting experiment in the elasticity of both sides of the market.

I think that there is a hidden assumption in you reasoning. That Saudis are fighting to "win" and their victory means destruction of US shale industry.

I think that they have a choice:
a) to cut output, boost price for a short while and loose market share;
b) to keep output, see price decease, maintain market share, and at least slow down shale oil expansion.

They also have their nearby strategical consideration, like Iran and Isis, which are vulnerable to price decrease.

So if I played with their cards, I'd keep the output unchanged. And hope for economic recovery which would boost the demand.

 

[mheslep]

Saudi Arabia exports about 7.7 million bbls per day, so the Brent price fall from ~$100/bbl last year to $60/bbl costs them ~$300 million per day, $114B/year if it keeps up. The Saudi economy is "heavily dependent" on petroleum production; 90% of the government revenue comes from oil. By contrast petroleum production is roughly 1% of the US economy (i.e. not inc refineries, not gas) and US some of the US oil producers have the option of switching to gas production. If the Saudis are intent on destroying Iran or Russia or Venezuela as a petroleum competitor they might succeed, but if the target is the US IMO they won't.

 

[Astronuc]

Actually, I paid about $2.75⁹/gal last week, but this week the same station has Reg (87) at $2.69⁹. Hopefully, it'll go down a bit more before I fill up.

I think gasoline is a bit more expensive in the NE. NY has some high gasoline taxes.

I think about three weeks ago, gasoline was about $2.55⁹/gal then I paid $2.37⁹/gal two weeks ago, and this weekend it was $2.15⁹/gal where I would normally fill up. We might get close to $2.00/gal.

Back in August, I paid $3.87⁹/gal!

Meanwhile - Saudi Prince: Oil will never return to $100
http://finance.yahoo.com/news/saudi-prince-oil-never-return-163600622.html
Certainly it could go the other way again.

 

[JonDE]

For the last month gasoline has been been falling roughly 10 cents / week in all regions of the country. The West Coast has the most expensive gas as always, but is on trend nonetheless to hit $2 in February. The falling trend is also helped by being off season for peak driving (summer).
http://www.eia.gov/petroleum/gasdiesel/

It may be that the Saudis have a mindset where they believe they can break any other supplier based on their past history. If this is the case oil could continue to fall. The fact remains that the Saudis must export oil to make money, while US producers do not. US producers have slowed down, but not much. Of the hundreds of drilling rigs in the shale fields of Texas (now the world's 7th largest oil producer by itself), only a hand full have been retired (WSJ). In the days of sandstone reservoir drilling, apparently it was the expense of the dry hole that sank an oil driller in a down market. In shale operations, the dry hole has become rare.

Bold is mine.
I know this post is over two weeks old, which is before the information all came out, but I just wanted to point out that it is somewhat incorrect because oil production is slowing down quickly.

This is down from 1,920 for the week ended December 5.

http://finance.yahoo.com/news/numbe...HI5MXByBHNlYwNzcgRwb3MDNgRjb2xvA2JmMQR2dGlkAw--
and here they have the current number at 1750 (the yahoo article above was quoting the same source just at a different date).
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview
So from 1920 on December 5 to 1750 on January 9. ~10% have closed in the last 5 weeks. With the last week being the worst at 61 closing.

 

[MathAmateur]

Low gas is not much of a threat to alternative energy in the long run. Most alternative energy is used to generate electricity, not run motor vehicles. Anyway, using even the present cheap gasoline to generate electricity would be more expensive than coal. It is actually Natural Gas which is the main competition to alternative energy. It is the cheapest form of electric power generation in the US (for now anyway).It is also not much of a threat in the long run to electric vehicles. The Nissan Leaf costs about 3.5 cents a mile to run. This is equivalent to about $1.40 a gallon gas for a 40 mile to a gallon car (which the Leaf would be if it burned gasoline). That price would bankrupt all the oil producers except Persian Gulf states.Considering that people like Buffet and Gates are betting tens (hundreds?) of millions in making better batteries, I wouldn’t bet against electric vehicles in the near future that can meet the triple demand of low cost, quick refill and at least 300 mile range. That would kill expensive gasoline for good. The Saudi Prince may just be right.

 

[mheslep]

Bold is mine.
I know this post is over two weeks old, which is before the information all came out, but I just wanted to point out that it is somewhat incorrect because oil production is slowing down quickly.http://finance.yahoo.com/news/numbe...HI5MXByBHNlYwNzcgRwb3MDNgRjb2xvA2JmMQR2dGlkAw--
and here they have the current number at 1750 (the yahoo article above was quoting the same source just at a different date).
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview
So from 1920 on December 5 to 1750 on January 9. ~10% have closed in the last 5 weeks. With the last week being the worst at 61 closing.

I prefer my adjectives to have a basis relative to other events. So I save ones like "much" for the like of the 50% rig declines of 2009 and 2002 (per your reference):

 

[mheslep]

It is also not much of a threat in the long run to electric vehicles. The Nissan Leaf costs about 3.5 cents a mile to run. This is equivalent to about $1.40 a gallon gas for a 40 mile to a gallon car (which the Leaf would be if it burned gasoline).

Total cost of ownership. Add in the battery driven purchase price premium of EVs relative to comparable conventional vehicles. TCO for EV vs ICE was ~comparable at $4/gal, at least for high mileage cases, but with a low price of gas combustion will have a significantly cheaper TCO, at least for low end vehicles.

Tesla has played a smart game in my view because i) they put out a high end vehicle where the battery price is a smaller fraction of the total price, ii) they emphasized overseas sales where high gasoline taxes give them an advantage. In my view the Nissan Leaf on the other hand is going to get creamed in the US by low gasoline pricers.

 

[phinds]

Considering that people like Buffet and Gates are betting tens (hundreds?) of millions in making better batteries, I wouldn’t bet against electric vehicles in the near future that can meet the triple demand of low cost, quick refill and at least 300 mile range. That would kill expensive gasoline for good. The Saudi Prince may just be right.

I don't think electrics are going to get far until the infrastructure (charging stations) has improved dramatically. Battery technology alone isn't going to do it (unless it was a quantum leap forward)

 

[mheslep]

A look back a couple years ago at a would be forecast about oil and gas prospects. Campaign speech in Miami 2012.

...
You can bet that since it’s an election year, they’re already dusting off their 3-point plan for $2 gas. And I’ll save you the suspense. Step one is to drill and step two is to drill. And then step three is to keep drilling. (Laughter.) We heard the same line in 2007 when I was running for President. We hear the same thing every year. We’ve heard the same thing for 30 years.

Well, the American people aren’t stupid. They know that’s not a plan, especially since we’re already drilling. That’s a bumper sticker.
...
You know there are no quick fixes to this problem. You know we can’t just drill our way to lower gas prices.
...
So what does this mean for us? It means that anybody who tells you that we can drill our way out of this problem doesn’t know what they’re talking about, or just isn’t telling you the truth. (Applause.)

 

[Greg Bernhardt]

A look back a couple years ago at a would be forecast about oil and gas prospects. Campaign speech in Miami 2012.

Just goes to show how much we should take politicians rhetoric with a grain of salt. I saw $1.83/G today in Milwaukee.

 

[mheslep]

I don't think electrics are going to get far until the infrastructure (charging stations) has improved dramatically. Battery technology alone isn't going to do it (unless it was a quantum leap forward)

Agreed. I don't see a viable economic path proposed anywhere for a roll out of nationwide coverage. The niche cases of vehicles drvien the same miles every day which always return to the barn work (e.g., local mail vans, school buses), but not personal transportation for arbitrary destinations. Roll out of, say, cell phone networks were viable because if http://jasonlbaptiste.com/wp-content/uploads/2014/11/gordon-gekko-cell-phone.jpg out of area he could fall back on the land lines. Meanwhile cell providers financed infrastructure (final total in the hundreds of billions) pay-as-you-go by collecting monthly charges from Gecko. That model doesn't work for transportation with arbitrary destinations. Doesn't mean its impossible, that someone clever can not find away, but its not yet visible.

 

[mheslep]

EIA oil production is usually two months behind; here's the data for Texas through October. In October, WTI oil price was down to ~$80/bbl from a summer high over $100/bbl.

2014. Thousand barrels per day.
Jan 2836

Aug 3261
Sep 3309
Oct 3357

That Texas production ranks it in the 10 country producers in the world, 7th I think. Before this is over, I'm guessing Texas will end up 4th in the world, behind only Russia, Saudi Arabia and the US as whole. Not quite #1 again, which it was 50-60 years ago.

 

[CFDFEAGURU]

$1.88 is the lowest in Kansas City Missouri right now. Anyone see anything lower? That's crazy low. Haven't seen that since the Clinton administration.

1.99 in Mableton, GA. According to a tweet from a news caster.

 

[mheslep]

US gasoline price by region. Now three regions under $2/gal. Two weeks ago there were none. Couple more weeks on trend and the southeast will go under. California six weeks.

01/12/15
U.S. 2.139
East Coast (PADD1) 2.253
New England (PADD1A) 2.350
Central Atlantic (PADD1B) 2.365
Lower Atlantic (PADD1C) 2.141
Midwest (PADD2) 1.950
Gulf Coast (PADD3) 1.911
Rocky Mountain (PADD4) 1.986
West Coast (PADD5) 2.490
West Coast less California 2.311

Every cent of price decline leaves $3.7 million per day in the pockets of drivers, nationally, or $433 million per day saved over a year ago.

 

[Astronuc]

Tuesday, Jan 13 - I saw $2.08⁹/gal this evening.

Thursday, Jan 15 - I saw $2.05⁹/gal this evening.

I wonder about this weekend.

 

[Astronuc]

I just saw gasoline for $1.99⁹/gal in our area! Unbelievable.

 

[gfd43tg]

What about when gas was less than $1 in the late 90/early 2000s?? Getting so happy over $2 gas around here, forgetting how we paid half that not so long ago. I remember my dad saying to my brother and I as kids in the car when we saw it "you'll never see gas below $1 again as long as you live" so far he has been correct. It was $0.88 a gallon.

 

[mheslep]

What about when gas was less than $1 in the late 90/early 2000s?? Getting so happy over $2 gas around here, forgetting how we paid half that not so long ago. I remember my dad saying to my brother and I as kids in the car when we saw it "you'll never see gas below $1 again as long as you live" so far he has been correct. It was $0.88 a gallon.

Comments like those are, I think, in part a comment on inflation.

Inflation corrected, the lowest US gasoline has ever been, since there has been gasoline and cars, was in 1998 at about $1.50/gal in 2013 dollars. Highest in 1918, 1981, and 2011.
http://inflationdata.com/inflation/images/charts/Oil/Gasoline_inflation_chart.htm

 

[lisab]

According to the Bureau of Labor and Statistics, $1.82 in 2008 is $2.00 today.

 

[Astronuc]

http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=6m (will float by date)

 

[jtbell]

While driving through Rock Hill, SC yesterday (on my way to Charlotte, NC), I saw several stations advertising $1.70 to $1.72 per gallon. I filled up on the way home. :D

 

[Astronuc]

I just paid $1.89⁹/gal, and filled up for less than $35. The price dropped $0.10/gal since Friday.

 

[nsaspook]

With prices so low even the classic Florida RV was back on the road in the Keys.

 

[davenn]

Unleaded 91 with 10% ethanol (E10) down to ~ AU$1.00 / Litre (AU$4.00/gallon) = US$3.21/gallon

Premium etc much higher

Dave

 

[nsaspook]

http://www.bloomberg.com/news/2015-...ew-saudi-king-says-policies-won-t-change.html

Oil fell to the lowest in almost six years on speculation the death of King Abdullah of Saudi Arabia won’t signal any change in strategy for the world’s largest crude exporter.