Adeo Ressi

We are already living in a $10 per gallon of gasoline world. Did that get your attention? Here are some things to think about:

The average yield of gasoline per barrel of oil differs widely based on the quality of the oil (logical), ranging from 5% to 30% of the 42 gallons in a barrel when using straightforward conversion methods. The price per barrel of oil that you read about is normally the “good stuff” (Texas or Arabian grade), yielding over 12 gallons of gasoline per barrel and as much as two thirds in prime conditions.

If you are just getting 12 gallons of gasoline per barrel and the barrel of oil costs over $100, we are pretty close to a $10 gallon of gas today. But, of course, we are not consuming the barrels of oil that are being pumped out of the ground today. We are consuming barrels of oil that were pumped out months and months ago, piped through deserts, loaded into tankers, shipped across the world, refined in the south, and trucked to our gas stations. We are living on yesterday’s oil prices through a series of logistics and complex financial schemes developed following the oil crisis of the early 70’s.

What is the real price of oil today? Well, it a lot closer to $10 than the $3 to $4 that we are paying at the pump… So it is only a matter of time before we are there. I estimate that we are about 24 to 36 months from an $8 - $10 gallon of gasoline.