Gasoline volatility

How long will it take on the down side?


Up $0.50 or more last week following Katrina

Now that the volatile futures price for gasoline has dropped $0.84 from its peak last week given a mad global scramble to release emergency supplies, how long will the bad boys pictured above take to fall? It's always slower on the down side. Is profiteering involved?

The tenuous situation in world oil enables a great deal of profit taking on events. There are some years left where prices will fluctuate, with temporary price crashes even possible. Afterward, however, as world oil production clearly enters a permanent monotonic decline, the sky will be the limit on gasoline.

I just can't predict exactly when that time will come. However, seeing the current situation, I am reminded of the exchanges I had with the fine Middle East affairs blogger Juan Cole, who wrote in January 2004 that ``Petroleum costs around $25-$30 per barrel, and is likely to go on doing so for decades.''

Though I greatly respect Juan Cole, I doubted this at the time. Is it not clear, after the crude price has reached and maintained a level double Cole's thinking, that the world is not as awash in extra oil as many academics and financial analysts just a short time ago thought it was?