As the photo shows, gasoline is already well above $4 per gallon in Chicago. The question is, is there a top?Some experts say $5 per gallon gas is possible by Memorial Day-or sometime in summer. Others caution that reaching that mark is unlikely over the next six weeks. In Chicago, the prices keep rising to near-record levels–with no relief in sight.
Eventually, high oil prices from the international spot market will slow oil-consuming countries' economies enough that the demand will decrease and oil prices will drop in response. At least, that's been the pattern in previous cycles.
A potential offset, though, is that the output of Saudi Arabia, the world's largest single producer, is declining for two reasons. One, some of the fields are reaching the end of their supply life and fewer barrels are being pumped from them. Two, the kingdom's own domestic needs are rising because of a rapidly rising population, meaning that Saudi Arabia is exporting a decreasing proportion of its production. Hence, “Saudi net exports of crude oil have entered terminal decline."
So we are in uncharted territory regarding supply and demand.
No comments:
Post a Comment