Life on the third coast

How high can the gas price go?

A barrel of crude oil holds about 42 gallons of crude.

This 42 gallons of crude is converted to about 20 gallons of gasoline.

The gas tax varies by state from .08 to .45 per gallon.

If we look at prices from 2007 we can see the price per barrel of crude is about ~1/3 to a half the price per gallon at the gas pump.

Month 2007 Price per gallon US Barrel of crude % price from crude
Jan 2.30 46.53 .49
Feb 2.15 51.63 .41
Mar 2.46 52.64 .47
Apr 2.63 56.08 .47
May 3.00 55.43 .54
June 3.13 59.25 .53
July 2.93 65.96 .44
Aug 2.81 64.93 .43
Sept 2.78 70.94 .40
Oct 3.00 77.56 .35
Nov 3.02 86.92 .35
Dec 3.08 83.46 .36

So about a third to a half of the price per gallon can be traced to crude. This means at $121 /barrel we’re looking at $3.04 to $6.34/gallon regular in our near future. At $200 /barrel it’ll be about $7.20/ to $10.80/gallon.

Gas prices world wide range from about $8/gallon in Europe to about $1/gallon in the Middle East at a time when we are paying $3.50/gallon.

Gas prices are rising now because the US dollar has been falling. In order to bail out the hedge funds which invested heavily in high risk mortgages and the US government which has spent far more money than it has fighting a war in Iraq the Federal Reserve has been busy printing money. More money means less value per dollar.

This has the effect of the US consumer bailing out the mortgage crisis and federal debt in the form of high costs for all goods not just gasoline. Whether or not this is the correct way to fix the problem I know not. It is certainly the traditional way the government has bailed itself out of trouble in many a country.

Is the future all bad? Perhaps not. If the rate of inflation can be kept under control it may be a little painful but not a disaster. And some of the money invested in the war will come back to us. After WWII transistors and radar and other war inventions brought about new industries in the private sector. There is every reason to believe that all the research and development in robotics for the war will spur new industries and bring more robots into our lives.

History of crude prices
History of US gas prices

More information:
A Primer on Gas Prices
Estimated Gasoline Price Breakdown