It has been 10 days since gas prices were last raised at the local gas stations in my neighbourhood.  A sign of a price reduction to come?

Well, if there is a price reduction, it will be a small and a temporary one if the past years has been any indication.

Since the era of $4/gallon gas is upon us, people are wondering when $5 gas will come. That is hard to say as there seems to a ceiling of sorts on the price of oil at $140/barrel. People are cutting back here in the United States on their driving but whatever slack on demand is generated is more than offset by increased demand in China and India. Production right now is flat and it does not seem that a large increase in production is going to happen any time soon. The long-term movement on oil appears to be upward.

The wildcard is disruption in supply. A terrorist bombing in the the midde east, civil unrest in Nigeria or a hurricane in the Gulf of Mexico can drive the overnight price of oil by $10 overnight. My biggest concern is a hurricane in the gulf states not so much for oil production but to refineries. When hurricanes Katrina and Rita hit back in 2005, gas prices increased immensely not because of oil supply but diminished refining capacity. Capacity is still tight and one refinery taken off line for any length of time will cause an immediate at the pump.

Going to be tense around August-October.