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Friday, June 6, 2008

$8 a Gallon Gas, Here We Come!

posted by on June 6 at 12:54 PM

Oil hit a new record high—$139 a barrel—after jumping more than $11 in a single day.

So you might want to think twice before you take the Wall Street Journal’s advice (reproduced today on the front page of the Seattle Times) about all the money you’ll save buying an SUV despite rising gas prices. Rebates and discounts are one-time savings. Rising gas prices would appear to be here for good.

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1

I'm loving the volatility of the past few days.

Posted by Bellevue Ave | June 6, 2008 1:05 PM
2

You know those totally legitimate guys that sell stereo speakers out of their van? I just had a couple of them offer to sell me a 55 gallon drum of used fry grease!

Posted by Porkchop Sandwiches! | June 6, 2008 1:13 PM
3

biodiesel thieves are on the prowl

Posted by Bellevue Ave | June 6, 2008 1:27 PM
4

To account for the same portion of average wages, oil has to rise to $160 a barrel to top 1980-81.

Posted by Fnarf | June 6, 2008 1:28 PM
5

@4- I don't think that is outside the realm of possibilities.

Posted by Kyleen | June 6, 2008 1:30 PM
6

At least now we know what Dick Cheney's secret energy meetings were all about.

Posted by Vince | June 6, 2008 1:33 PM
7

an "analyst" predicted $150/barrel by July 4, and zoom!, off it went.

what's (not) hilarious is that consumption is dropping like a rock in the US, but it has no effect on this speculation.

good thing i still have a wood burning fireplace.

Posted by max solomon | June 6, 2008 1:36 PM
8

Are any of those decommissioned missile silos in the Dakota's still available? Getting off the grid is looking better and better all the time.

Posted by Westside forever | June 6, 2008 1:39 PM
9

Demand in other places that are not the US is not plummeting.

Posted by Fnarf | June 6, 2008 1:47 PM
10

Yah, Asia is finally positioned to take up as much demand slack as we can give. That's new.

The unchecked price rise in energy is happening at the same time our highly leveraged national housing economy has begun to slowly unwind. Odd weather ahead, mebbe.

Posted by tomasyalba | June 6, 2008 2:02 PM
11

get your ultrashort ETFs in order folks.

Posted by Bellevue Ave | June 6, 2008 2:04 PM
12

And hardcopy newspapers wonder why their readers are leaving in droves...that article was dumber than shit and most people are smart enough to realize that.

Posted by michael strangeways | June 6, 2008 2:10 PM
13

@9:

Silly Fnarf. Please, explain to the rest of the class how world oil demand has increased dramatically since last night.

For extra credit, explain how oil demand has more than doubled in the last six months. If you can do it, it'll be a neat trick, since experts who follow the market professionally can't come close to finding a rational explanation.

Posted by A Non Imus | June 6, 2008 2:29 PM
14

Actually, Fnarf is alluding to the reality that stated oil reserves by a number of supplying nations are less than anticipated and projected demand in other nations (e.g. China, India, etc) has increased from the former low projection numbers.

There's a piece in the WSJ today on India's fast growing car and motorcycle sectors and the implications of that on total global demand for oil, as well.

The inflection point, as even morons like Charles Krauthammer of the WP have commented on, has already arrived. But it was actually at $3.25, not $4.00 - the market anticipates as well as reacts.

Posted by Will in Seattle | June 6, 2008 2:35 PM
15

non imus, the rational explanation is people speculating on higher prices and thusly make futures contracts at rates that are below where they think the price of oil is going but above where the spot price is.

these contracts to fulfill demand at a certain price count as the demand for oil.

at least that is the simple version.

Posted by Bellevue Ave | June 6, 2008 2:35 PM
16

But if we agree with your precept, @15, then the soundest thing to do is make sure that hedge funds pay a full capital gains tax rate and cannot escape taxation by "locating" on tax haven islands in the Carribbean.

Or nuke China to reduce oil demand.

Either would work.

Posted by Will in Seattle | June 6, 2008 2:39 PM
17

You might want to take a look at this article:

http://money.cnn.com/2008/06/06/news/economy/tully_oil_bust.fortune/index.htm.

Maybe it's a bubble, and like the real estate bubble and the tech stock bubble before it, it will burst.
The insane rise in price today suggests that.

Posted by Hal | June 6, 2008 2:41 PM
18

You might want to take a look at this article:

http://money.cnn.com/2008/06/06/news/economy/tully_oil_bust.fortune/index.htm.

Maybe it's a bubble, and like the real estate bubble and the tech stock bubble before it, it will burst.
The insane rise in price today suggests that.

Posted by Hal | June 6, 2008 2:43 PM
19

@13: Oil demand doesn't have to double for prices to double. It's all about elasticity of the demand curve. Meaning, if there's a whole lot of people who really need to use oil almost no matter what it costs (an inelastic market) then a relatively modest increase in demand (or shrining of supply) can cause big changes in price.

Posted by Eric from Boulder | June 6, 2008 2:48 PM
20

eric, don't pollute their minds with extra concepts they will refuse to believe it exists.

Posted by Bellevue Ave | June 6, 2008 2:53 PM
21

I hate being sick and i hate living on the west coast.

Posted by Bellevue Ave | June 6, 2008 3:04 PM
22

@19 - they can take the bus, just like city council and county council can take the bus. They don't "need" to drive to work.

They just "want" to drive to work.

Posted by Will in Seattle | June 6, 2008 3:36 PM
23

I think the rise in oil prices is based in fundamentals--tightening supply (and the likely approach of a production peak) and exploding demand in Asia that offsets conservation gains elsewhere. But the current run-up involves some speculation, too. I fully expect for prices to surge, then pull back. But I think the new bottom is whatever's supported by the fundamentals, and is probably around $100/barrel. That will seem cheap.

I also wouldn't be surprised if this is only the first wave in a longer-term pattern of volatility. Maybe 20% increase per year will be sustained, but with a lot of ups and downs along the way.

Posted by Cascadian | June 6, 2008 4:27 PM
24

You're definitely missing my point, Will, and I was briefly irritated on account of that, but suddenly it doesn't really matter to me, because THERE! the minute hand just advanced to my quitting time, and I've got tickets to see the Rockies crush the Brewers tonight. In a little over an hour, I'm going to be slurping down that first cold one, watching batting practice. How's _that_ for glamour?

Posted by Eric from Boulder | June 6, 2008 4:31 PM
25

Sorry, I was watching Jar City when you posted that EfB @24.

Posted by Will in Seattle | June 7, 2008 2:14 AM
26

We as Americans should stand up for ourselves, we are being taken for a ride and i for one think its time we do something about it!

I say we take to the free ways on foot to protest, this has got to stop and we have to let the government know that we are not stupid and we will not take this crap no more!

Posted by john Doe | June 8, 2008 12:49 PM

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