$1000 per 42 Gallons in a Barrel is almost $24 a gallon. The average American drives 12,000 miles a year in a car that gets 20 mph. Thus he (or she) uses 600 gallons a year. At $28 a gallon, buying 600 gallons equals $12,000 a year. Minimum wage is only $5.85 per hour as of July 2007. If we assume $6 an hour times 2080 hours in a 40 hour per work work year, that person is earning ONLY $12,480 for the year. Given that 7$ of those wages MUST go to Social Security Taxes, and anywhere from 2-4% goes to local and state taxes, the minimum wage earner can NOT even pay for the gasoline for his car let alone any other bill (including the car itself).
My point is way before oil gets to $1000 a gallon, you will have people STOP buying oil. With this drop in demand (do to the high price) the push for higher prices will slow down. Thus oil will NOT get to $1000 a Gallon in the near future (i.e. within the next five years). The only way oil will go that high is if wages goes up with the price of Gasoline. Given today's weak unions in the US, cost of living increases are a thing of the past, so most people will just be priced out of the market for oil.
Now I can see the price of oil entering a See-Saw period. By See-Saw, I see the price going up, to a point where less and less people can afford oil, and then do to less and less people buying oil, the will go down (but then go back up as people find they can afford oil again). This See-Saw will go on for decades as supply slowly dwindles (The push will to for the price to go up overall). The big question is when will Oil enter this See-Saw period? I suspect when Gasoline per gallon price gets close to the US Minimum wage. US minimum wage earners are the next largest oil using group. Most of the poor in the third world are already out priced. Previously the poor in the Asia Tigers (Indonesia, Malaysia, Singapore etc) were the check, but they used oil for mostly cooking and thus use a lot less then American Minimum wage earners. These Third World wage poor are now out priced. The countries they live in still import oil, but for use by industry, their military or higher income people, all of which are willing to pay more than US minimum wage earners. These third world users of oil thus CAN not be the check their poor has been till now.
As to Europe, Japan, China, Korea, and even the former Countries of the old Warsaw Pact (Including Russia), all use a lot less oil than the US does. All oil used is such countries tend to be by higher income people, the Military, Government or industry. All of which can and will outbid US minimum wage earners. Again NOT a check. Once you look at possible checks in demand, it keeps coming back US minimum wage earners.
Thus, given how low other counties use oil, the price of oil will go up TILL US MINIMUM WAGE EARNERS can NO longer afford to pay the bill. That appears to be less than $5 a gallon in Gasoline or about $210 a Barrel (42 gallons to a barrel times 5). Thus I suspect a steady raise to at least $200 a Barrel and a slow increase after that date stopping while before it hits $300 a barrel. Please note I am ONLY assuming NO inflation AND no inflation driven wage increases. Given the weakness of Unions compared to the 1970s I fully expect to see NO cost of Living wage increases, if Congress should older such increases the price I am setting will be higher as Americans will be able to afford oil longer.
In Simple Terms, Oil will go to $200 a barrel and then stagnate, till future reduction in supply forces higher prices. We will have oil for 140 years, through at a rate DROPPING at the approximately the same rate as oil usage increased form 1859 till 2005. Remember Peak Oil is NOT when oil runs out, but when we have used 1/2 of the oil we can used and production of oil will continue, but production will drop each year for approximate 140 years (This is the "Bell Shape" statistical Curve Oil production does in most fields and has been following on a world wide basis since 1859). Hopefully we will adjust our society to reflect the drop in oil being produced. For example get people to live closer to where they work, buy food produced closer to where they live, and even produce a good part of their own food. It took use Decades to get to where we are, and it will take us Decades to adjust. A good oil price increase may get people to accept we have a problem and make the adjustments, instead of ignoring it and hope it go away.
Another way to look at this is from a Minimum wage workers prospective:
Income: 2080 hours (40 hours per week for 52 weeks) at 5.85 an hour=
$12,168 per year
Less the following:
Housing, if in Public Housing, 30$ of his Pay (If Not much higher).
$3650.40 (or $304.20 per month)
Taxes: 7% Social Security
$851.76
Food: 365 days per year at 3 meals per day at $2 per meal equal=
$2190
Total payments for Federal taxes, food and Housing+
$6687.76
That leaves $5480.24 for all his other bills. If we ignore his need for clothing entertainment, car payments, car insurance etc, he can pay up to $9.10 a gallon for gasoline (or $382.20 per barrel).
If we assume he has to pay at least $1480.24 per year for Maintenance of the Car, insurance on the Car, and for payment for the car itself that leaves just $4000 dollars for gasoline. $4000 0avoided by 600 gallons the average American uses, he can pay up to $6.66 per gallon (or just under $280 per barrel).
Remember for every dollar more than the $2 a meal I used above decreases the money available for gasoline by $1095 per year (365 times 3 meals a day).
I can go on, but the numbers are depressing. The Military pays more than $2 a meal, but if you increase the cost per meal to $4 a meal, you are reducing the amount of money available to buy gasoline by almost $2200 (Leaving less then $1800 to pay for gasoline which means no purchase if gasoline gets to $3 a gallon or $126 dollars a Barrel).
Please note the prices I use in this thread EXCLUDE taxes which in the US can be up to 32 Cents per gallon. For the tax in your state see:
http://www.energy.ca.gov/gasoline/statistics/gas_taxes_by_state_2002.htmlI also relied on 12,000 miles driven per year as the standard, many poor people drive more do to the fact they hold two or more jobs. I also ignored the cost of distribution and refining gasoline in this thread. Roughly 25 cents per gallon, but varies.
Anyway, my point is demand for oil goes down long before the price gets to $1000 a barrel, I suspect $100 a barrel. My brother reports that at the retailer he works at, they are having problems hiring people for Christmas do to the price of Gasoline. He was talking about Teenagers for the Season, but it shows how the raise in the price of Gasoline has affected minimum wage workers already.
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