A Silver Lining To This Financial Crisis: Cheap Gas

As the financial markets around the world are crashing in on themselves, we may see an unexpected benefit: decreasing oil prices, and therefore, cheap gas. Many analysts are predicting that crude prices are in a bit of a bubble, which will pop as the world goes in to an economic slowdown.

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.