As the US dollar crashes and the financial markets around the world start to implode, we may see an happy side effect: cheap gas. Oil prices may be in a bit of a bubble themselves, and when the economic slowdown happens, they’ll start to drop. Last week, we’ve seen the lowest oil prices since 9/11/01
Peter Beutel, an oil analyst at Cameron Hanover, predicts a low of around $50 or $60 a barrel in 2009, and even lower prices in 2010. “I’m not going to rule out some extraordinarily low numbers, even $20 a barrel,” he said, “Whatever the market does, it’s going to make us all look like fools.”
Deutsche Bank compared oil prices to several other measures, and concluded that crude oil is the most overpriced commodity right now. Compared to it’s historic price average of $35 a barrel, crude is 100% higher, currently higher than any other commodity. Relative to per capita income, oil prices would have to fall to about $45 a barrel to return to it’s historical average.
$45 dollars a barrel may not be on the horizon, but even if crude got down to $60 dollars a barrel, that would represent a gasoline price of just over $2 a gallon. That’s half what many motorists were paying this past summer.