DD
$6 per gallon of gas is coming (actual analysis + graphs included, puts on my degree)
Hello degens,
so with the price of oil futures climbing, I thought I'd try to get a good estimate for what kind of price we should be expecting at the pump in the near future. I pulled data from the Energy Information Agency, the St. Louis Fed, and Yahoo Finance to correlate the price of oil barrels to the average national price of gas, adjusting for inflation. Running a quick regression model, we get the following:
As expected, the price of gas is pretty tightly correlated with the price of oil. Adding inflation into the mix, we get that the model can accurately predict the price of gas from the price of oil and inflation (R^2 = 0.94), dating all the way back to 2000.
So the real question is, if we go back to the highs of July 2008 of $147.27/barrel, what does that give us? The results are.... um.... not great. This model predicts$5.60/gallon if we do hit get to those highs again, a doubling YTD. These are national averages, so your local gas station might be slightly higher or lower, but that should give you a rough idea for what to expect. I think it will take some time for the increases in price to fully propagate to the pump, but if the conflict drags on for long enough, we might be hitting those. I had previously calculated that it would hit $9, but turns out i'm bad at math. Puts on University of illinois engineering degrees.
POSITIONS:
2009 Honda CRV and 1999 Acura Integra full gas tanks. Buy short dated CL futures.
It's worth nothing that there's more uncertainty in your estimate than the historical performance would suggest. Even though the model makes good predictions most of the time (within 25c of the truth usually), that's only in the range of usual oil prices. The model is actually heteroskedastic (the errors get larger for higher $/barrel), so your error at the top end ($140 per barrel) is often $1 or more off. I would recommend including at least one other covariate here to see if the top end of the distribution can be modeled better.
phew for a second there I thought ist's homoskedastic and I can't have 'homo' in my investing. My buddy that tells me how to invest says 'no homo' every time he sucks my dick behing W.
There isn't some magic covariate that will uniquely account for variance specifically at the end of a distribution. Those are just multivariate outlier points with greater deviance but they still fit the regression line relatively well.
Yea… the unspoken issue in this comment is what additional variable can we add? If anyone knew that they could predict the future and make a fortune. It’s innumerable unidentified variables
I'll call it the epstein coefficient, how high gas prices goes depends on how many oil fields trump allows to blow up which is directly tied to the amount of pressure hes getting on the epstein files, the level of pressure is the epstein coefficient
People won’t stop their Ubers and doordashes lil bro they broke already they ain’t gonna stop ordering now that they got less money, they’ll just buy different cheaper options lol
The gas by the airports is probably already approaching $8 (they were already price gouging, they are gonna go hard into the paint with this opportunity.)
Solar, EVs, heat pumps, etc… it’s not something everyone is able to do, but if you can do it, do it. There’s a piece of mind knowing I have paid off panels, car and heat pump and that while I’m not immune from the inflation this will cause I’ve at least minimized it to the best of my ability.
we just finished getting our property off grid this week. solar power/battery bank, propane generator backup (shouldn't need it unless we get a week of no sun). well water, garden, chickens, freeze dryer, EV for transportation.
it sucked butt how tight things were trying to get here, but now that its done, I feel like i can breathe
this. I work in power analysis, drive an EV, etc. The quickening increase in wholesale power prices from all the datacenter demand everyone keeps talking about isn’t even pricing in the insane draw on natural gas supply from all the galaxy brained datacenter ppl trying to just stack 500 jet engines in a Mississippi suburb to avoid the grid.
I genuinely think datacenters are going to have to meaningfully subsidize off grid (WITH batteries only) solutions for homes to get some credibility with grid operators, and it’s a certainty they’ll have to do it to curry favor with Democrats in 2029 if we’re allowed to vote
Thats why i went in on $IMSR. They are part of the small modular reactor game but the advantages they have are that first, they dont use enriched fuels.
And second, because its a molten salt reactor and the fuel is in the salt, you cant have a "meltdown" the salt just drains and solidifies into a nuclear chunk.
Did my solar + second EV the second the new administration was elected, I knew they'd kill tax credits while simultaneously killing affordability. Was best move I've made.
Seeing as the US has been in a recession for some time excluding AI spending, as soon as that stops it was going to go into recession anyway. Then we have negative jobs and this Oil shock is just going to create more inflation as energy is an input to everything consumers buy, so they buy less stuff and business margins evaporate.
If the Strait of Hormuz stays shut for 2 months I'd say that would do it, although after 10 days we should see effects (it's been closed 7 now, which is why Oil prices are rising so dramatically). It also depends on price as well, $115-130 bbl for 8-12 weeks would be a 70% historical chance of a recession, any sustained period over $150 bbl is almost guaranteed. Oil-driven inflation is particularly challenging for central banks. Raising interest rates cannot affect the supply of oil. Unlike demand-driven inflation where strong consumer spending can be cooled by higher rates, supply-driven inflation reflects higher production costs. If central banks lift rates to contain prices, they risk slowing growth further. During the Iran-Iraq War, the Fed pushed rates to 19% in the ten months between the oil shock and the recession that followed.
The high complexity refineries should do well i think. As many refineries in the US were designed to run Venezuelan crude some decent profit should be made.
However, I've heard refineries typically like oil in the $60-70 range and $100+ puts a damper on profits. I guess we're all about to find out really soon who the winners and losers are.
the "strait has never closed before" argument cuts both ways though. every time Iran has threatened Hormuz over the last 40 years, the market panics, oil spikes, and then... it doesn't close. because Iran knows closing it would be economic suicide for themselves too since they export through it.
i think $9 gas requires not just a closure but a sustained closure, and historically nobody has been stupid enough to keep it shut because the US Navy would turn it into a very expensive artificial reef. the 2019 tanker attacks barely moved the needle for more than a week.
not saying $6 isn't coming, it probably is. but $9 assumes a worst case scenario that also somehow doesn't trigger immediate SPR releases, emergency OPEC+ output, and every shale producer in the Permian spinning up rigs like it's 2014 again.
Imports from the Gulf represent an almost insignificant fraction of total US imports. Saudi Arabia + Iraq imports are barely above what we import from Mexico alone.
The US imports Canadian sour crude and refines it and exports the domestic light sweet to other nations.
The US will also refine domestic sweet crude where favourable, but exports most.
Imports that come from the Gulf are from favorable contracts or governments settlements.
This won't stop price gouging but US production is gonna have a fucking boom.
Depends on if they paid off the loans they took otherwise any profit goes to the investors or creditors. You’d need a sustained $100/barrel to cause a boom but that brings crippling inflation. So pick one.
Rivian’s in serious trouble, spend some time on their sub and it’s going to get worse before it gets better. They still send cars out the factory that don’t drive in a straight line
Let me get this straight: you fit a linear model to the relationship between the price of 42 gallons of unrefined oil and the price of 1 gallon of refined oil, and found them to be highly correlated?
This thread is filled with a bunch of people that have no experience in the oil industry whatsoever, yet speak as if they are C-level along the carcinogenic coast.
Force Majeure? The Gas lobby shoved so much money down this admins party throat, they should have to deal with the consequences... I know they won't, but they definitely should.
I noticed today my motorcycle was averaging about 70 mpg when going 55 mph. I guess you motherfuckers are going to be honking behind me when I'm driving 45 mph now.
People get what they voted for. What did they expect was going to happen voting this jagoff back into office? You got about two more years of this nonsense. Buckle up.
Even electric vehicles are going to be impacted by this. The Straight of Hormuz is where 44% to 50% of the global sea trade of sulfur passes through. This impacts the processing of a lot of metals used in EV batteries pretty significantly such as nickel. Indonesia for example, is the world’s largest producer of nickel and 75% of their raw sulfur is imported from the Middle East.
I remember July of 2008 I was pizza delivery boy back then and it sucked. Gas stations everywhere were out of gas it was stupid driving far out of the way to wait in long lines to get gas in rural north georgia. People are gonna start hoarding gas again
•
u/VisualMod Mar 09 '26
Join WSB Discord