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How Long Will Gas Stay Around $2 A Gallon?



In the last few months, gas prices have been wonderfully low.

Economists have a few predictions about the future of gas prices.

Where Are We Now?

The current nationwide average price for a gallon of normal gasoline was $2.27 as of July 13.

Even more astonishing is the fact that for over a quarter of gas retailers in the country, the average price today is below two dollars per gallon.

Last week almost 30,000 gas stations had prices below $2 per gallon, whereas the previous week only 20,000 stations were able to boast such low prices.

Prices Are Breaking The Rules Of Supply And Demand

This low average price is seriously surprising to consumers and economists alike, considering the fact that gas demand has recently hit an annual high in the United States.

The Energy Information Administration is currently forecasting oil consumption to continue its increase steadily.

Their current estimates hover around 130,000 barrels per day.

This would mean an average of 9.29 million barrels of oil a day for every day of 2016.

If their predictions were to come true, this year would have the highest daily average consumption of any previous year on record.


Causes Of Astonishingly Low Oil Prices

The reasons behind the current record-breaking low prices are varied and can be traced to different players throughout the global oil economy.

But a few likely causes for the low fuel prices seen this month include:

  • The overall influx of crude oil supplies
  • The lack of disruptions to major refineries, which the country has typically been experiencing early on this year
  • Current surplus supply in most fuel inventories in the country, again due to the influx of fuel supply

This summer, the daily average cost of gasoline is a whopping 20% lower than the daily average cost of last summer, according to Gas Buddy.

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 Broader Trends Point Towards Stability

In an interview with MarketWatch, senior analyst Patrick DeHaan noted that this month has seen a consecutive decline in prices each and every day.

Refineries have been keeping up with demand, so there have not been any price spikes due to scarcity this month.

At the beginning of the first week of July, demand was a full 2.9% higher than the same week in 2015.

By the end of the week, it was up 2.9% from the same week last year.

This falls in line with the broader national trend of increased gasoline demand every year.

However, the decrease in prices is somewhat a rarity, especially as the conflict in oil-producing areas continues.

Could Anything Shake The Trend Of Declining Prices In The Near Future?

DeHaan predicts that summer prices will likely remain low.

However, he also mentioned that because hurricane season is rapidly approaching on the east coast, it has the potential to shake things up a bit.

During natural disasters, especially ones with a large impact, oil prices tend to increase dramatically in a short period.

Statisticians and economists at Gas Buddy predict that the average will hopefully be likely to stay somewhere between $2.10 and $2.35.

The EIA marked its prediction at $2.25 per gallon this summer (calculated as from April to September), about 39 cents lower than the average cost last summer.

They estimate that drivers seeking low prices can likely expect the total year average for this year to be $2.12, and in 2017 they predict it will have risen to $2.28 per gallon.

What Do These Low Prices Mean For The Industry And The Environment?

Despite the joy we may feel at having to fork over less cash to fill up our tanks, the low prices aren’t something necessarily to jump for joy over.

In fact, it could mean more trouble for in a few years down the line.

With lower prices, consumption increases.

 This means more traffic on the roads more often, more exhaust emissions (especially problematic in cities that already experience poor air quality), and if trends continue, eventually decreased stocks of oil.

This will lead to higher prices; after all, we can’t change the fact that petroleum is a finite resource.

Planning For An Unpredictable Future 

Even petroleum producers admit that eventually, we will have to reduce our petroleum dependence and invest in more renewable energy sources.

It may be worth considering investing the money you save from low gas prices into energy-saving strategies like installing solar panels on your car.

You will probably need it down the line when volatile gas prices inevitably rise again due to one thing or another.

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