Barring an unexpected event in the world such as a war in Iran or Korea, it looks like gas prices might be heading down a bit.
Normally as you approach Memorial Day, gas prices start trending up. But there’s nothing normal about this year. We may have already seen the peak price for gas this year.
The fundamentals of the gas market are favorable: The amount of gasoline in storage right now in Cushing, OK (a key point in U.S. oil distribution) is nearing an all time high. We’ve driven less this year than we have over the past ten years. We’re buying more fuel-efficient vehicles. Auto makers are using better technology to ensure better mileage.
And typically, when the price of oil goes up, the economy suffers. So why are we seeing economic improvement (slow as it may seem), despite the recent rise in gas costs? It’s simple: while oil has gone up, the price of natural gas have collapsed. The warm winter we just had reduced the need for natural gas heating across the nation. This decrease in natural gas prices, coupled with our more fuel-efficient tendencies, have combined to keep the economy relatively stable this time around.
On top of this, we’ve had massive success in extraction of oil and gas in the U.S. and Canada recently. In the not-too-distant future we may have little to no dependence on foreign oil supply due to our improved energy independence. We may even see a surplus, which we’ll transport and export overseas. The U.S. is on the verge of becoming an energy production and exporting powerhouse. Who could have seen that coming?! But it’s yet another example of the value of American enterprise, the creativity of our entrepreneurs, and the intelligence of our scientific community. Soon, foreign oil will no longer have us over a “barrel!”