Recently I participated in an email discussion that started from someone speculating how habits would change when gasoline hit 10 dollars per gallon.
That got me thinking, when will gasoline hit ten dollars per gallon?
There are several things working together, the first is of course the rising cost of oil ( massive demand growth from China and India, combined with falling production everywhere )
The second is the declining value of the U.S. dollar against every other benchmark.
A minor one is the increasing cost to refine the oil into gasoline, as we use up the light sweet oil and replace it with heavier oil.
Slowing the growth of the price would be:
Weakened economy due to high gas prices, more fuel efficient vehicles entering the market, driving less.
Instead of analyzing all those things, I am just going to take the historical price trends and extrapolate them out.
Over the last 10 years gasoline has increased an average of 7.5% per year.
Over the last 7 years gasoline has increased an average of 10% per year.
However there have been dramatic swings in the prices, it hit a high of $4.11 in 2008, a low of $1.61 at the end of 2008, and then back to $3.97 in 2011.
So there are 2 questions:
When will the average price of gasoline over several months sustain $10 per gallon?
When will gasoline hit $10 per gallon for the first time – even if it dramatically falls again shortly after?
Here are my predictions:
I believe that gasoline will very likely sustain $10 per gallon by Jan 1, 2023
Based on the current trends the earliest likely time to hit $10 per gallon is August 2018
Since there are 1-3 years between gasoline price peaks, I would give even odds that gasoline will hit the $10 mark before the end of 2020.
Of course, since hitting $10 per gallon may throw the world economy into recession, the price could easily plunge down to $5 per gallon within months of hitting $10 the first time.