The idea of two dollar a gallon gasoline is both exciting and saddening at the same time.
First, I spend a lot of money on gas, so a drop in the price that dramatic would free up some of my money for other things.
Second, the idea that I perceive two dollar a gallon for gasoline as cheap saddens me. I sold my favorite pickup because gas was so expensive $1.19 a gallon.
I miss that truck.
Anyway, how do we get from here to there by autumn?
Through Saudi Arabia’s vendetta and the collapse of the oil market:
The biggest uncertainty in the global oil market isn’t whether oil prices will drop further — they seem likely to — but how long they will stay down. In short, how long, and at what scale, are the petrocracies likely to suffer? This state of affairs is a woeful blow to petro-rulers after nine years of mostly nirvana. The year 2003 started with oil at about $33 a barrel, after which prices went mainly up, peaking in July 2008 at $147 a barrel. They bounced back nicely even after the global financial crisis sent prices plummeting below their 2003 level, to about $31 a barrel in December 2008. When the Arab Spring unfolded, first Libya and then Iran triggered worried looks on trading desks in London and New York, and the price spiked to about $128 a barrel. My mom saw the average price of gas in California rise to $4.36 a gallon. But then the concern of war between Iran and Israel all-but vanished, and prices since have been on a seemingly relentless decline.
Now, a convergence of forces is weighing on petro-rulers’ nerves: Europe’s economic crisis; a slowdown in Chinese growth including the demand for oil; a steep decline in U.S. oil consumption with a simultaneous rise in domestic oil production; and a determined effort by petroleum colossus Saudi Arabia to build up global inventories.
The article goes on to explain why Saudi Arabia is behaving the way it is. They are upset with Russia and Iran:
…the former for failing to help calm the fury in Syria, and the latter for refusing to go to heel and give up its nuclear ambitions; in both cases, the Saudis think lower prices will produce a more reasonable attitude.
The article says oil rich states need high oil prices to maintain order. Saudi Arabia hope to punish Russia and Iran by breaking their banks.