Here is my forecast of long-term gas prices, based on the following assumptions:
1. Gold will increase by 17% per year.
2. The average ratio of gold/oil is 13. When there is a recession, the ratio increases, and in boom years, the ratio decreases.
3. There are 42 gallons per barrel, and the retail markup, including distribution costs and taxes, is an additional 50%.
Dates are as of 9/30 of each year. Right now the prices are lower than this because the ratio of gold/oil is currently higher than 13, but this is the long-term trend.
Year Oil Gas/gal
=== === ====
2012 146 5.22
2013 169 6.04
2014 200 7.14
2015 238 8.52
2016 277 9.89
2017 323 11.54
2018 377 13.46
2019 438 15.66
2020 515 18.41
2021 600 21.43
2022 700 25.00
Why would gas prices go up this much? Well, the Fed is playing games with the dollar to keep the interest costs low. Most prices within the "internal" economy, which includes imports from China, will only rise at about the official CPI, which may be 2-3% per year. However, oil comes from the "external" economy, from places like Saudi Arabia, and there will be more money chasing fewer barrels of oil, and thus the price rise.
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