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2011 and the Gas Price Outlook
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Original Message
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So I figured I'd wait a week or two before I posted this.
I've had some good debates about the price of gas over the last few weeks and the FIRST point brought to me about gas prices NOT going up was:
- It is the holidays, it will go down again.
Well, Christmas and New Year's are over. It's the 14th of January and pretty much, it still went up.
NJ's average went up right after the New Year, right over $3.00:
[link to njtoday.net]
Now, I'm paying 2.93.
Last year at about this point, I was paying about 2.39.
That's pretty much a .50 cent increase in the course of the year, but what's interesting about that is the increase was made not DURING the year, but during the last HALF of the year. It wasn't until AFTER Labor Day that the price started spiking up.
But wasn't the usual trend that gas prices spike up during the summer schedule... anytime between Memorial Day and Labor Day... go down, and then back up for Christmas Holidays?
If it was, that trend is over.
Right after Labor Day, my gas price was at $2.49, so theoritically speaking, at Sept 5th, it had gone up a whole 10 cents over the course of the first 8 months. By year's end, it had gone up to $2.89 in my area. Using my area as a sample size, it had gone up 10 cents PER MONTH within the LAST four months of the year. Christmas is over and it still has jump 2 cents per week in my area. It was steady at $2.89 for the first month of January and in THIS last week it went from 2.89 to 2.93. Now there are still 15 days left in January which means that it can still continue the trend upward to 10 cents per month. Now realistically, I don't expect the trend to mathematically follow a perfect plateau of 10 cents per month. Maybe it'll stall at 6 or 8... but given the last four months, I think it'll continue to 10 cents per month. Now here's the scary month given my scenario. Let's say that this trend of 10 cents per month continues, despite what you think of gas prices and seasonality...
It would suggest that 10 cents per month would look like this in a perfect "control" environment for MY area:
February 5th: 2.99
March 5th: 3.09
April 5th: 3.19
May 5th: 3.29
June 5th: 3.39
July 5th: 3.49
August 5th: 3.59
September 5th: 3.69
October 5th: 3.79
November 5th: 3.89
December 5th: 3.99
NOW, my area is slightly lower than the New Jersey average. At the time the above article came out, the average was 3.00 when MY gas was at 2.89 so we'll declare a deviation of about 10 cents between MY gas station and NJ.
Now, we also know that NJ pays a little less than the national average for gasoline. And it that holds true, a LOT of states like Alaska, will be seeing that $4 earlier than December. Remember, my scenario holds true ONLY if the price goes up 10 cents a month. I'm not even taking into account the fact that summer demand will skew my projection... so in other words, YES, I know my calculations are flawed and I am admitting that from the get-go, but I'd rather be prepared with a control group of my own based on a few months of analysis rather than try to project including variable measures.
Back in September 2010, when the national average was $2.74, NJ's was $2.50 so that's a .24 cent deviation. Essentially, MY deviation from the national average is about THIRTY cents.
[link to www.nj.com]
Folks, this ISN'T good news. The only trend downward in gas in the last 3 year cycle since the 2008 implosion was right after the summer of 2008 when we went to the highest prices seen EVER to the lowest prices we'll never see again. I'm basically making this post as a means for discussion towards the trend.
Let me know whether I am jumping to conclusions based on a small sample size of prices since 2008 or if the trend looks just about right. I already know I am NOT accounting for deviations in my statistical and yet simplistic model of .10 per month, but the last 4 months of 2010 show me no other reason to believe that it would go DOWN at all.
If by September 5th, I'm paying $3.69... that means that the national average will ALREADY be close to $3.99... and there's that dreaded $4.
I HAVE said in the past that gas would very likely hit $4 in the summer, and when I said that, I meant the national average. And so far, it seems I "might" be correct. The bottom line is implicit though, what it means is that unlike 2008, this time we're already screwed instead of "about to get screwed". This time food inflation is hitting us hard. Oil and gas prices aren't going to help. A solution isn't "take a care pool" or "ride a bike". This will affect us EVERYWHERE, from the food we buy, to the gas we use in our cars, to the plastic we need, etc...
Looking forward to some discussion about this.
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