With World Oil Consumption at Record Levels, Is a Return to $2 Gas Out of the Question?

August 18, 2011

Gas has been getting cheaper lately. The national average price has dropped nearly 10 percent from its 2011 high of $3.91 per gallon in May, and with the summer driving season wrapping up, some analysts see prices falling even further in the coming weeks and months. But is the recent decline at the pumps a normal downward correction or a sign that speculators drastically overreacted this spring, as turmoil in the Middle East threatened world crude supplies?

It’s a question that is probably on the minds of many in the auto industry as companies like General Motors, Ford, and Hyundai radically retool their lineups to maximize fuel economy. The upward momentum of gas prices has led to a surge in purchases of compact vehicles like the Chevy Cruze, Ford Focus and Hyundai Elantra, and though supply shortages have hampered sales of some hybrid models, the gas-electric market seems poised to continue to grow as long as gas prices remain near current levels.

While would like to see gasoline fall back to below $2 per gallon, one Republican presidential hopeful yesterday went so far as to make it a campaign promise. At a campaign stop in South Carolina, Minnesota congresswoman Michelle Bachmann vowed Tuesday to lower gas prices back to 2009 levels by expanding domestic drilling. “Under President Bachmann you will see gasoline come down below $2 per gallon again,” pledged Bachmann. “That will happen.”

But trends in international energy consumption and the limited potential of undeveloped resources (like those in the Arctic National Wildlife Refuge) to dramatically increase output, make a return to $2 gas nearly unthinkable barring a severe global economic decline. According to a recently released report by the Worldwatch Institute, international oil consumption grew 3.1% percent in 2010 to 87.4 million barrels per day, boosted mostly by increased demand from growing economies like China—which now uses about 10 percent of the world’s oil output. “The momentum of future market growth has moved to the developing world, where oil consumption did not miss a beat during the recession and shows no sign of slowing,” said Natalie Narotzky, co-author of the report.

Regardless of where oil prices are headed, carmakers will have to continue to build more and more efficient cars to keep pace with emissions standards in the United States and Europe. But whether consumers buy cars at the higher end of the fuel economy spectrum—particularly hybrid and electric vehicles—depends largely on oil prices. Thankfully for automakers who have hitched their fortunes to fuel-efficient cars, a Michelle Bachmann presidency would be unlikely to be able to deliver upon the drastic drop in gas prices that candidate Bachmann promises.


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  • Mike_

    I really, REALLY hope she doesn’t become the next US president. I didn’t think they could possibly come up with a worse candidate than Palin but Bachmann clearly shows there’s no shortage of potential disasters on the US political landscape, and Perry’s no better.

    To think that she can chop gas prices in half by increased domestic drilling is naive at best, criminally irresponsible at worst. Of course, Bachmann’s world view is that the Earth is simply a huge ball of resources just waiting to be plundered, so it should come as no surprise.

    The market will dictate oil prices no matter how much oil is being produced; a couple of years ago when oil prices were hovering at $147 a barrel prices were artificially high due to market speculators, and not because of oil shortages. OPEC opened the flood valves to try to stem the ever rising prices and had absolutely no effect. No increasing US production by a few percentage points will make absolutely NO difference. But of course Bachmann can afford to promise the Moon to voters as there are many gullible types that will swallow her “promises” hook, line and sinker.

  • Capt. Concernicus

    I’m flabbergasted! I don’t even know what to say about the garbage that spews out of her mouth on a daily basis.

    Mike–I don’t know who’s worse either. Both her and Sarah Palin are only telling the American people what they want to hear.

    I don’t know who’s more stupid. Michelle or the people who follow her and believe what she says…

    Yikes…

  • Max Reid

    At $100 / barrel which contains 42 gallons, Oil alone costs some $2.3 /gallon. Add to it the transport, refining, distribution, profits, it comes to $3.5 / gallon.

    How can she bring it down to $2/gallon. Dont believe this false promise. Every day, some 70,000 vehicles were sold and it will surely raise the price of gas. Get ready to buy a hybrid.

  • James Davis

    Where are the republicans finding these people? First it was Bush/Chaney, then it was McCain/Palin, now it is Bachmann…and who? Palin’s husband…Bachmann/Palin. Bush increased the gas per gallon to $4.15 and in doing so wiped out 10 million jobs, collapsed the housing market, closed down 125 F500 banks, collapsed the Insurance Industry, and the health care system. McCain/Palin tried to continue the Bush collapse, but the American people wised up in time. Now the republicans are trying to bring in a new McCain/Palin to continue the Bush collapse. Has the American people dozed off again like they did with Bush/Chaney…maybe, but let’s pray not.

    Obama is trying to encourage the American people to get off foreign fossil fuels and onto the road to clean energy and electric vehicles. If Bachmann/Palin is elected president, they will do to Obama what Regan did to Carter…take all the money from clean energy and direct it back to dirty energy, ie., fossil fuels.

    Stop the republican madness and keep Obama as president so he can get us on the right path to clean energy before it is too late.

  • Charles

    Capt: Bachmann’s followers are the idiots. Unlike Palin, she is smart. Please do not underestimate her. She could lead her fools on a rampage that would make W’s time in office look like the time of milk and honey.

    You would think a web site about hybrid cars would not be all that political. With Bachmann’s lies about how drill baby drill can cut gas prices almost in half and Perry’s lies about global warming, I guess any site seeking truthful information is now a political site.

  • RW

    Gas will never be $2 again unless its short term during a severe global economic downturn. Even if we could keep up with growing 3rd world demand for a while, all of the world’s oil will eventually be consumed, either now or later, so what’s the rush? It makes more economic sense in the long term to allow OPEC to exhaust their supply first. Then 25 years from now we can sell ours at $300/barrel, using more efficient, cleaner technology which will be available then to extract it.

  • George Parrott

    Let’s dispense with any concerns about ecological issues, air pollution, or the absolute inevitability of a finite oil supply and just pillage the Alaskan wilderness and have more regular oil spills in our oceans.

    Live for today, or maybe yesterday, and ignore everything about tomorrow.

    At $2/gallon, we can also return to production of the Hummer, and promote a “Hummer in every garage.”

    THAT is “American Freedom.”

    Ooops, it seems more like delusional ranting, or was that simply Republican political rhetoric?

  • Anonymous

    Unfortunately, one plan might be to get rid of the federal gas tax to artificially lower gas prices. This could give the economy a boost short term but send more of our $$ overseas.
    As others have said here, gas prices need to be stable, and mid-range so car companies can see consistent policy and the lower and middle classes can adjust the spending habits for mid-range prices. Bouncing from $2 gas (if possible) to $5 gas and back will just keep everything spinning.

  • Pablo

    The communist government of Michelle Bachmann will dictate the prices as Stalin did in the USSR. To keep the gasoline price under $2 per gallon they will subsidize it by taxing the innovations and the research, unless the research consists in drilling for oil. Also they will tax the owners of hybrid cars for decreasing the profit of the oil companies and so not being patriotic. But if you have an electric car you will burn in hell.

  • sri

    May be she can do it. A depression would probably bring the price close to that, wouldn’t it?

  • John S

    Finally a president that wants to keep our dollars here instead of wanting to give it away to terrorist. Go Michelle Bachmann. Even if she doesn’t hit the two dollar mark more domestic drilling would have a positive impact on our economy by creating more US jobs and helping to lower the price of gas.

  • John S

    Finally a president that wants to keep our dollars here instead of wanting to give it away to terrorist. Go Michelle Bachmann. Even if she doesn’t hit the two dollar mark more domestic drilling would have a positive impact on our economy by creating more US jobs and helping to lower the price of gas.

  • Daniel O

    Ron Paul can do WAY better as president then Michelle Bachmann. She is just like bush and even teamed up with him in 2007 for the senate sit. She is not even a true TEA party. She will he just like Bush and cause another war and increase the debt ceiling. All that comes out of her mouth is LIES LIES and More LIES!!! Oil is always going to go up and down but never to $2 again unless we get in a double dip recession.
    Thank You,
    Free us from oil in America

  • MrEnergyCzar

    Chindia is driving now. Why not promise free gas.? Politics doesn’t determine our geology or that we sit on 3% of the worlds oil reserves and use of 20%…. They could have no 18 cent federal gas tax, that’s about it.

  • douglas prince

    Will gas ever get back down to $2 a gallon?
    No.

    Next question….

  • douglas prince

    Oh, and for those of you who think ripping apart US soil is going to lower the price of gas, think again.
    As soon as oil, DRILLED ANYWHERE, hits the market, it’s price is determined globally. It won’t make a lick of difference where you dig it up, the price is reflected by the global market, not by the local digger.
    Bachmann is an idiot and anyone who votes for this dipwad may as well crawl under their bed now and try to “wish away” all the scary, nasty stuff.

  • Johnnn

    Really? I would like to see some data supporting that statement. Like, how much should be drilled to make a difference.

  • Mr.Bear

    It may have been under $2 in January 2009 but it was over $3.75 in May 2008. Is Bachmann being critical of GWBush?

  • George Parrott

    The price of oil is driven by world demand, and that demand is going up markedly as China and India become addicted to personal automobiles the same way as the rest of the industrialized nations. Between China and India we have a potential market for cars that exceeds that of ALL of the rest of the world, so know that they (China and India) want their fair share of the “good life” just like all of us have been enjoying.

    And there is already a bidding war going on for the oil supply we have grown so used to using with no concerns. The days of cheap fuel are as past as the days of coffee at $ .10 a cup….and we will see neither of those “good times” again.

  • Rand

    Mike wrote…”To think that she can chop gas prices in half by increased domestic drilling is naive at best”

    So…Mike, you choose to ignore the laws of supply and demand? So increased supply does nothing to change the price? Take an economics class already.

  • Rand

    Mr. Bear, please get your facts straight. Gas was $1.84 / gallon in January 2009, just befor Obama took over.

    http://news.consumerreports.org/cars/2009/01/average-gas-pricesjanuary-26-2009.html

  • Charles

    Rand (after Ayn?), full out domestic drilling can only provide a small increase in world oil supply, therefore only providing a small, probably imperceptible drop in price. No where near the $2.00 drop Bachmann is talking about.

    So go take a real economics class and forget all the you thought you learned reading the Cliff Notes versions of The Fountainhead and Atlas Shrugged.

    Now I agree that Bachmann could/would get gas to $2.00 a gallon. I just do not think anybody wants the deep recession/depression that it would take to get there.

  • Rand

    Charles,

    We can get there without a deep(er) recession/depression. These countries do:

    Taiwan Taipei $2.84
    Lebanon Beirut $2.63
    South Africa Johannesburg $2.62
    Nicaragua Managua $2.61
    Panama Panama City $2.19
    Russia Moscow $2.10
    Puerto Rico San Juan $1.74

  • Kurtzzzz

    Let’s look at your examples of cheaper gas. It turns out in Puerto Rico gas is sold by LITERs, not gallons. In April a liter of regular in Puerto Rico cost $0.95 or about $3.60. I wonder how many other of price quotes are as turthful a Michelle Bachmann speech.

  • Dan Tole

    That’s a pretty bold statement. American’s have become very aware of gas prices and fuel economy in the last few years as we’ve been forced to tighten our wallets. Gone are the days of being interested in gas guzzling SUVs. Car manufacturers on on the right track to continue distributing fuel efficient and hybrid vehicles.

  • John Clarks

    Gas will never ever be 2 dollars a gallon. The banks are so over leverage that tripling the supply of Euros and dollars will be the only answer. This will devalue the currencies by at least 50 percent. They will do this via the ECB and the federal reserve selling bonds to each other. The results will tripling the currency to keep all the European banks and Americans from complete collapse. Buy gold and silver.

  • Mr.Bear

    I’m pretty sure I have my facts straight. I said it may have been under $2 per gallon. Rand, you said it was $1.84. Last I checked $1.84 is less than $2.

    See statements agree. Amazing!

    It’s also true it was over $3.50 in May 2008 (when oil hit $140 per barrel). This was during the last year of GWBush’s Presidency.

    Bachmann is criticizing Obama for $2.50 / gallon gas. Last I checked $3.50 was more than $2.50.

    So where her criticism of $3.50 / gallon gas under GWBush? If $2.50 is bad, surely $3.50 was much worse.

    File Bachmann’s criticism under “it’s okay for a Republican but not for a Democrat”

    Truth is, the price of oil is dropping. Speculation is that oil consumption is going to drop because of the ongoing world economic problems. Speculation is trending from oil to gold because of worries about stagnant growth or even worse: stagflation. I honestly wouldn’t be surprised to see gas drop below $2 / gallon by the end of the year.

  • Mr.Bear

    My bad, the local gas price is $3.40, not $2.50. Guess I kind of stopped paying attention when they finished building Light Rail out my way.

    But still, $3.40 is well short of the $4.12 gas hit under GWBush.

    I do remember $4.12 gas quite vividly because I was driving a Jeep Wrangler that got 18 mpg on a good day.

  • Joe

    Many lies and derogatory comments on Michelle Bachman. While Obama has bankrupted the USA and nothing is better! We need to get off foreign oil to save this country. I am sure Obama is definitely thinking as some Democrats his re-election is in trouble.

  • Tim G.

    To All,

    If we convert our (world) transportation system to an electrified transportation system, we can drive the price of gasoline well below $2.00/gallon. Oil then would only be used for non-transportation uses.

    In the process, we would create unknown high paying sticky jobs, transforming our carbon society to an electron society and the middle class and below would be the winners (as we reduce their energy costs and create, high paying life sustaining jobs. And this could be accomplished by wrestling away the power of the Oligopolies that dominate our economic system. And in the end they too would prosper because the consuming class would have money to spend.

    Retrofitting our current stock of autos and homes to electrons, with the new technologies that are now available is the answer to the funk and fear we are in.

    Balance and sustainability are the key.

    Thank you for listening to my thoughts!

  • Tim G.

    To All,

    If we convert our (world) transportation system to an electrified transportation system, we can drive the price of gasoline well below $2.00/gallon. Oil then would only be used for non-transportation uses.

    In the process, we would create unknown high paying sticky jobs, transforming our carbon society to an electron society and the middle class and below would be the winners (as we reduce their energy costs and create, high paying life sustaining jobs. And this could be accomplished by wrestling away the power of the Oligopolies that dominate our economic system. And in the end they too would prosper because the consuming class would have money to spend.

    Retrofitting our current stock of autos and homes to electrons, with the new technologies that are now available is the answer to the funk and fear we are in.

    Balance and sustainability are the key.

    Thank you for listening to my thoughts!

  • Tim G.

    To All,

    If we convert our (world) transportation system to an electrified transportation system, we can drive the price of gasoline well below $2.00/gallon. Oil then would only be used for non-transportation uses.

    In the process, we would create unknown high paying sticky jobs, transforming our carbon society to an electron society and the middle class and below would be the winners (as we reduce their energy costs and create, high paying life sustaining jobs. And this could be accomplished by wrestling away the power of the Oligopolies that dominate our economic system. And in the end they too would prosper because the consuming class would have money to spend.

    Retrofitting our current stock of autos and homes to electrons, with the new technologies that are now available is the answer to the funk and fear we are in.

    Balance and sustainability are the key.

    Thank you for listening to my thoughts!

  • Tim G.

    I am sorry for the duplication of my comments!!!

    I didn’t know how to use the blog!!!

    Thanks
    Tim

  • Greg

    Even if the US was 100% self sufficient for their oil, the price would still be set by world oil markets, so no matter what we are tied to global oil demand.

    Between $2 gas and her remarks about us fearing the Soviets she has demonstrated that she is totally unfit to become President.

  • Mike_

    @Rand – To you, I would say take a common sense class already. Go ahead and vote for Bachmann, you’ll be crying uncle halfway through her first term.

    The US has only a tiny percentage of the world’s undeveloped oil reserves. Even if Bachmann went all out and ordered the systematic raping of the American natural resources, the amount of additional oil that would come onto the market would be insignificant compared to total demand. During the oil crisis of a couple of years ago Saudi Arabia became alarmed at the uncontrollable rise in oil prices and convinced OPEC to ramp up production to maximum capacity, increasing world supply by upwards of 5% (the US would never be able to increase suppply anywhere close to this). The effect? Oil prices shot UP sharply, a completely unintended effect and clearly indicating that the forces controlling oil prices were not solely supply-driven, but rather also strongly driven by speculators and profiteers. Recent studies have also noted that even massive increases in the production of the Alberta Tar Sands (representing a large chunk of North American capacity) would likewise have no appreciable effect on global oil supply.

    So next time you’re sitting in your Tea Party Debunker’s throne why don’t you read up before criticizing others and making a fool of yourself.

  • Greg

    @ Rand

    You forget that supply and demand are not totally free in the oil markets. Even if we discovered a huge new oil field in the US it would not necessarily affect world oil prices, as OPEC would just close the taps a bit and drive prices right back up.

  • JohnSpencer

    Garbage in, garbage out. I wonder who programs this lady.

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