Analysts: $4 Per Gallon Could Return Soon

Nov 10, 2009

The idea of “peak oil”- that oil production has reached its highest point and will decline due to economic, geological and technical restraints- has existed for some time as a possible consequence of modern oil consumption.  But recently, people in the oil industry are beginning to take peak oil seriously.

Steven Kopits of energy analysis firm Douglas Westwood agrees with the proponents of peak oil.  His forecast for the near future: get ready to pay $4 for a gallon of gas again.

 

Several factors are converging to make $4 gas more likely.  David Bowden, executive director of the Association for the Study of Peak Oil & Gas-USA in Denver, says the supply of oil will lessen in the next few years, leading to higher prices.  Some believe that higher prices could also lead to a “Seesaw economic recovery” in which high prices would slow down economic growth until oil demand falls again.

 

The most important question in the debate over peak oil is one without a certain answer: when will the world reach the oil peak? Has it already?

Kopits says that oil most likely reached a “practical peak” in 2004 when world oil output reached a plateau, no longer keeping pace with economic growth. Some investment banks say that the world’s July 2008 production of 86.7 million barrels per day was the peak.  Still others say that this year is the peak, at 89.6 million barrels per day.

 

The debate over the actual circumstances of the oil peak makes it very difficult to plan for.  Although there is an abundant supply of natural gas available, a new fueling infrastructure is necessary before it can be effectively used by consumers.  It could take a full decade to make the necessary changes.

What could you do today to manage fuel expenses so you’re prepared long before prices soar tomorrow?