The Actual Reason Why Gas Prices Are Going Down in USA

For the past 10 years, Americans have become strangely accustomed to drastically fluctuating prices at the gas pumps, often with little to no warning.  After all, there doesn’t appear to be a whole lot the common consumer can do about it, other than car-pooling or utilizing public transit systems.  It is simply out of our hands and beyond our control. Or is it?

Record Breaking Numbers

We are currently experiencing a record breaking decline in prices for consecutive days (over 46 days in a row as of 11/11/14). This sudden trend has everyone scrambling to find an explanation for the drastic drop in prices.  Just take a look at this graph provided by AAA’s Fuel Gauge Report this month:

AAA’s Fuel Gauge Report states that this, “…is the longest consecutive decline since 2008.  Absent any unanticipated market-moving events this winter, the retail price for gasoline is expected to remain relatively low.”

The report went on to say that “as gasoline stations continue to adjust to falling oil prices in the global market, consumers are likely to experience the lowest Thanksgiving prices since 2009.”

In AAA’s report, they also provided data which showed the states with the highest and lowest fuel rates as of 11/17/2014.

The Answer To Our Economical Woes?

In a Washington Post article titled ‘The Hummer is back: Thank falling oil prices,’ writer Chico Harlen reports, “As oil prices hit a three-year low, Americans are starting to see price changes that could ultimately influence everything from their grocery shopping to their heating bills to their travel.

“The lower prices — should they be sustained, as expected, for the next few months — have the potential to nudge the U.S. further away from its dreary post-recession mindset, leaving instead a nation with more affordable air and road transportation options, higher consumer confidence, and yes, a few more gas guzzlers driving around.”

“Some American consumers and business owners say they weren’t yet confident cheaper prices at the pump would stick. Instead, they say, they are treating the sub-$3 gas as a helpful little gift, but not as a green light to make major adjustments.”

Panic At The Pump?

CNBC recently interviewed Abdalla Salem el-Badri, secretary general of OPEC, who told of how “the media is really panicking and the market is panicking, the consumer is panicking and the producers are panicking. We really should sit and relax and look into the situation.” He argued that the recent plummet in the oil price is due to “speculation” by traders, rather than oversupply as some have suggested.

“The fundamentals do not really deserve this decline in price. Oversupply in the market is not really that much to deserve a 28 percent decline,” he said. “We are looking at speculation that has some effect on it.”

Discounts, Discounts Everywhere

There have been some suggestions that some OPEC states, like Saudi Arabia, are driving the price of oil down to keep their market share, in the face of increased competition.  On November 4th, Saudi Arabia cut the price of oil destined for the U.S. while raising it for other customers in Europe and Asia, shaking up international energy markets.

Most Americans aren’t aware of the market jockeying that takes place globally among oil producing countries.  For instance, the information on the graph below may take many Americans by surprise when they learn that Canada was the largest supplier of crude oil to our nation, showing a 65.8% increase in the last ten years.  Such statistics make it clear why Saudi Arabia is giving the U.S. lower prices.  Over that last decade they’ve lost a good portion of our business to Canada.

We’ve Got Our Own, Thank You

CBS News also reported that our own domestic production of oil has grown substantially in recent years, causing our reliance on other nations to become smaller. “According to the EIA (Energy Information Administration), America’s domestic oil production has grown from 5.6 million barrels per day (bbl/d) in 2011 to 7.4 million bbl/d last year. And the administration’s short-term energy outlook is projecting continued “rapid production growth” for this year and 2015 — with the projected production forecast for 2015 averaging 9.5 million bbl/d.”

Also included in the CBS report was information addressing the fact that technological breakthroughs in alternative energy sources continue to rapidly be advancing.  Cutting down on our own need for oil is growing into a more formidable competitor than any other nation.

Executive Director for energy and sustainability at University of California Davis, Amy Myers Jaffe stated that, “part of the reason that Google and Intel and Microsoft and all these companies have come up with these fantastic energy efficient batteries, storage, and off-grid energy solutions is because the utilities…couldn’t provide them with reliable electricity.”

She goes on to add, “I think renewable energy, even though the oil industry doesn’t believe it, is going to continue to compete. Because oil is geopolitical, you can never say that consumers don’t have to worry about it,” she notes.

“My opinion is, barring a major catastrophe in the Middle East, oil will drop to $50 a barrel, and gasoline prices are going to get even lower than they are now.”

Our Move Toward Energy Efficiency

When you add in factors such as more energy efficient vehicles and a move toward turning away from even owning cars, makes the forecast for continued lower gas prices hopeful.  As a matter of fact, the American Public Transportation Association released a report earlier this year stating that “In 2013, Americans took 10.7 billion trips on public transportation, which is the highest annual public transit ridership number in 57 years.”

The Price At The Pump: How Do We Compare?

If you are an American, count your blessings. Our current average for regular grade gasoline nationwide is around $2.92 a gallon.  Take a look at these current average gas prices around the world: (Although foreign gas is allocated in liters, these figures are in gallons for American comparison; figures provided below are as of 11/10/2014).

Price per gallon of gasoline in

  • United States of America: $2.92
  • South Africa- $4.35
  • Brazil- $4.39
  • Canada- $4.47
  • Beijing, China- $4.54
  • Australia- $4.99
  • Singapore- $6.09
  • New Zealand- $6.44
  • Frankfurt, Germany- $6.81
  • Israel- $7.00
  • Portugal- $7.15
  • Ireland- $7.23
  • United Kingdom- $7.23
  • Greece- $7.57
  • Japan- $8.17
  • Italy- $8.25

Ultimately, no one really knows how low they will go, or how long the lower prices will last, but in the meantime, all we really should be doing is enjoying it.  With the rapid development in alternative energy sources, the future is still hopeful but never guaranteed.

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