Gas Prices: Is $4 per gallon the top?

Posted May 12, 2008

“What if I said that gasoline prices were headed for the $4 a gallon level, but once they got there, they’d head no higher? Accompanied by that reassuring bit of alleged ‘certainty,’ gasoline at $4 a gallon doesn’t sound quite so scary.” — William Patalon

by William Patalon

Baltimore – (TFN): How does the prospect of $4 per gallon gasoline sound to you?

Undoubtedly, it doesn’t sound all that great.

But what if I said that gasoline prices were headed for the $4 a gallon level, but once they got there, they’d head no higher? Accompanied by that reassuring bit of alleged “certainty,” gasoline at $4 a gallon doesn’t sound quite so scary. In other words, we know that gas prices are headed higher, but we also know that there’s a limit, and we know exactly what that limit is.

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Early last week, the U.S. Department of Energy said that it expects average monthly gasoline prices to peak at $3.60 a gallon this spring, since that high price will serve to curb demand and keep prices in check (although even the Energy Department report said that before prices level off there could be interim price spikes that will take gas prices up over the $4 a gallon level.).

With oil prices having spiked above $112 a barrel last week on reports of declining oil supplies, grandstanding politicos on both sides of the aisle took the opportunity to bash each other’s energy policies (Don’t tell me… it must be an election year.). Seeming to add credibility to the Energy Department’s prognostication was last week’s inventory report that showed that demand is waning - ostensibly because record gas prices now stand more than 55 cents a gallon higher than they were at this time last year. Read on to learn more.

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