Gasoline prices worldwide

As oil prices have nosedived since July, gasoline prices have also come down considerably. In the matter of months, the situation has changed dramatically. In July, oil reached the record level of $147 per barrel. This week, oil prices slid below $40. As you can read in my post “Crude oil prices dropped below $50 per barrel hitting a three-year low” , almost all oil exporting countries need oil prices far above $50 a barrel to be able to pay their bills. Venezuela and Iran even depend on $95 per barrel to balance their budgets. But their latest output cut could not stop the oil price slump. Now, an energy analyst from Merrill Lynch even predicts that oil might temporarily drop below $25 in 2009 given the bad shape of the global economy. The analyst expects this scenario if the recession spread to China. Though I doubt that China’s economy will contract, Chinese growth rates have fallen sharply in recent months. If oil prices really came down to $25 a barrel, gasoline prices would be below $1 per gallon.

Today, I don’t want to make any short-term predictions about how oil prices might develop over the next few months. Actually, I think it is unprofessional to make short-term predictions at this moment given all the uncertainty of these days. Things are likely to turn out contrary to what we expect today. Anything could happen between now and spring.

Nevertheless, I’d like to know your thoughts on this. I’d appreciate it  if you shared your views:


So, let’s come back to gasoline prices. As I announced last week, I spend hours on Internet research to give you an overview of gasoline prices in some of the most important countries. I converted all prices into USD/gallon:

gasoline prices worldwide

gasoline prices worldwide

This is an overview of the gasoline price development in the United States by the Energy Information Administration:

As you can see, gasoline prices in the U.S. and around the world have fallen even steeper than stock markets. While drivers in America have to pay less than  50% of July’s prices, the price fall in other countries is less impressive either due to extremely high taxes or b/c the government dictates the price at the gas station. Countries subsidizing gasoline like China and India can reduce their spending on gasoline subsidies now.

On the one hand, falling gasoline and heating oil prices benefit hundreds of millions of consumers around the world. Inflationary pressure has also eased off giving central banks space to cut interest rates. However, on the other hand, this extreme price plunge is as damaging as the spike earlier this year. Necessary investments into new production capacities are being delayed, renewable energy projects appear to be uneconomic. This is a dangerous situation as a supply shortage will be the inevitable consequence once the economy rebounds. In all likelihood, we gonna see demand outstrip supply in about 18 months from now. An even more spectacular price hike will be the consequence. As OPEC proves to be unable to stop the price decline as markets are driven by fear and some OPEC members cheat on their quotas, OPEC will struggle to raise oil production when the supply side crunch is coming.  Since the end of  World War II, oil price spikes preceded most recessions. Our dependence on the black gold is the root of all evil.

If you’re interested in how we can become independent of OPEC oil, check out some of my posts. Though I cannot predict where oil prices will be in March, I can assure you that oil will rise above $150 per barrel within the next 5 years, depending on the severity of the current recession. After all, the United States’ oil consumption is down by more than 1.2 million barrels a day. (now 19.3 million barrels a day from last year’s 20.5 million barrels per day) The challenge is to prevent oil consumption from  rising again when the economy does better. In order to reduce dependence on OPEC oil and to counteract global warming, we need to invest billions into the energy technology sector, increase efficiency and save energy.

The Air Car could revolutionize transportation – an electric car without an electric motor

WORLD ENERGY OUTLOOK 2008 – “What we need is nothing short of an energy revolution”

Our prosperity hangs by a thread as it is based on a limited resource – oil



Filed under Economy, Global Issues, Uncategorized

2 responses to “Gasoline prices worldwide

  1. Pingback: Who cares about OPEC? « What Matters

  2. Pingback: 2009: year of change, challenges and chances « What Matters

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