Sunday, January 25, 2009

A Cup of Coffee for a Gallon of Gas

Remember the day when a cup of a Starbucks coffee is equal to a gallon of gas?

On July 17, 2008, the national average price for regular unleaded gas was recorded high $4.11 ( Today, the national average is $1.845, which is less than half of the highest price. Now the question is: will the price of a gas come back to a level of $4/gallon again? or will it still be the same as today?

According to an article in The Wall Street Journal, World News: Slowdown Depresses China's Fuel demand, the slowdown of China economy has resulted in the sharp drop of world fuel demand. China is ranked number 2 after U.S. for the world's largest oil consumer. The global economy crisis has resulted in downturn of energy demand especially in industrial sector not only in U.S. but also around the world.

The data from EIA (Energy Information Administration) Shows that U.S. motor gasoline consumption in 2007 is 390 million gallon/day. Analyst projects that oil consumption will be doubled in 2030. What is this mean? Oil price at some point will jump back up to a high level again. Crude oil was traded at $45.64/barrel earlier today but Analyst predicts that it will easily jump up to level of $70/barrel once the economy recovered.

1 comment:

Laure said...

In spite of the current economic crisis, I think the fundamentals of an increasing price of oil are well established. The economic growth of China (1.3 billion people) and India (1 billion people) will inevitably drive the oil demand up.

Will bio fuels be a solution? Maybe partially. But then again, food prices will go up, as in early 2008 (note: bio fuels are not the only reason), and starvation will continue to rage in the poorest areas of the world.

I think we should keep in mind that today, energy-related decisions not only affect the economy, the environment, or the national security, but may also have repercussions in other sectors (e.g., food) and on populations who do not always have a say in these same decisions.