Will gas prices ever go down in the states? If not, when will the price peak?

Question

Now, this might sound silly, naïve, and/or ignorant to some of you, but it's something I wonder every single time I spend $50-$60 filling up at the gas station.

I got my first car just a few weeks after 9/11/2001 so ever since I started paying for gas, prices have been one of those big concerns that everyone is talking about. The prices have done nothing but ascend, fall a little, then shoot up again - and that’s all I’ve ever known. It also makes me think that time has flown since then…wow, 7 years…really? I feel old.

In any case…

I know that the price will rise and fall seasonally; however, I keep assuming that once this “stuff” is done overseas (or at least settled a bit, I don’t think it will ever be “done”) the prices will descend again…but will they? If not, will the price ever peak?

I’d be grateful for a REAL, educated answer.

Yes, I’ll personally pick out the “best answer.” Thanks, guys!

Answer 1

The prices won't be falling considerably if at all, anytime soon.  There is too much demand for energy (fuel, natural gas, plastics (which are made from oil) from countries like China, India, and others.  

OPEC is also extremely greedy, and they will slowly increase prices, a few pennies at the time.  This way there wouldn't be an outcry from the American consumers.  If they were to say, increase distribution prices by $50 per barrel overnight, they'd be in a world of hurt.  

Prices are expected to reach $5 per gallon by mid next year, and top $4 per gallon by June of this year.

You can also thank the Tree Huggers (environmentalists) for these prices.  Had exploration companies been allowed to drill in the ANWR and off the coast of California, we wouldn't have to rely on imported oil as much as we do now.

Contrary to what the Tree Huggers would have you believe, wild animals are not impacted by drilling and production.  I have tons of photos of deer and antelope standing next to gas flare fires in the winter time, and tons of pictures showing them leisurely strolling through natural gas well locations in Wyoming.  Of course, them being against offshore rigs in off the California coast has to do with their "view" of the ocean.  Never mind most of the rigs would be a good 20-40 miles offshore.



Let's not get into how less sulfur is supposedly good for the environment, and how it takes a ton more chemicals to "wash" the sulfur content down to 15ppm in diesel fuel.

But now, I'm just ranting.  I'm on y messenger if you ever wish to discuss this in detail.

Answer 2

Gasoline prices have risen primarily because of the weaker dollar.  Gasoline and oil are global commodities that don't fundamentally change from one country to the next.  This means that oil producers and refiners can sell their product in China or India as easily as they can sell it in Paris or New York.  What the weaker dollar has done is make it more expensive for us to buy the same volume of gasoline.  Industry experts maintain that the inherent price of crude oil is down around $80 per barrel, where it was before the US economy started to unravel due to the housing crisis.

If you look at historical price charts, you'll see that gasoline has risen at a linear rate since 9/11.  The interesting aspect is that it was linear prior to 9/11, the fundamental difference is that global tensions have made the oil market and investors less secure in long term supply.  When the risk of war looms in the Mideast, investors simply wipe the potential output of the warring countries off the map and assume oil will become more scarce.  This drives up prices, since everyone wants the remaining product.  

Think of when a disaster hits your town.  Everyone rushes to the store to buy bread and milk.  Stores get wiped out, because everyone buys as much as they can hold.  Our laws prevent price gouging, otherwise the stores would jack up prices to make as much as possible.  If you were threatened with  real starvation, would pay $20 for a loaf of bread or a gallon of milk?  You betcha you would.  Would you pay $100?  It probably depends on how much cash you have and how hungry you really are.  At $20, the shelves would probably still be empty, but at $100, it would take some time to sell out.  The global oil market operates in much the same way.  Investors bet the prices will rise and purchase future production contracts, hoping that the oil produced will be worth more when it's actually produced.

Commodities are also a hedge against inflation.  Gold is the best known commodity.  A couple of years ago, gold was trading for about $400 per ounce.  Last month, gold was trading for over $900 per ounce.  Why?  Because it's real, and real assets are worth more than paper assets.  When the economy gets shaky, real assets become popular.  They gain value as the dollar weakens, because gold doesn't change, so the value has to.  Silver and platinum are the same way.  Thieves have begun cutting catalytic converters out of cars bcause they're worth over $300 each, due to the platinum coating inside.  These same principles apply to gasoline and oil.

Once the economy stabilizes and the dollar begins to strengthen, oil and gasoline prices will soften.  If we can resolve our struggles in Iraq and Afghanistan, that will further reduce risk, which will soften price pressures.  The US refining network has some $80 billion committed to expansions, which will reduce the pressure on the refining system, so that if one refinery goes down, another will be able to fill the gap.

As for prices, they won't ever drop below $2.50 again, I'm sorry to say.  With the emerging economies of China and India using as much petroleum as they can lay their hands on, global demand will remain high for the foreseeable future.  I just saw where Hugo Chavez wants to charge a windfall profit tax on all oil exported out of Venezuela.  This means that oil producers will make less on oil they get from Venezuela, which will reduce output from there.  Less output means more demand on the remaining supply and higher prices.  I doubt this will last, because producers won't pay more for Venezuelan oil than they will for Mexican or Canadian oil, for instance.  Little known fact, Canada is our largest source of imported oil, Mexico is either #2 or 3, depending on where Saudi Arabia lies.  We always hear about the Mideast, but most of our oil is north american.

Just so you know, I started driving in 1979 and gasoline was about 80 cents per gallon.  We used to complain just as much then as we do now.  I remember my dad griping about gasoline being 35 cents per gallon in the 60's!!  Prices for everything rise and we had a few years  in the late 90's and early 00's where gasoline was relatively cheap compared to other items.  We forget that when inflation and recessions loom, gasoline spikes and doesn't come down until the recession is over.  I remember double digit inflation and unemployment when I graduated high school in 1981.  I fought my friends for the few jobs there were to get.  Layoffs were common and families got split up because dad had to move hundreds of miles away for work.

Oh yeah, and when we actually start paying for the war, the dollar will strengthen as well.  We've been financing it so far and our national debt is through the roof.  Just before 9/11, we had essentially wiped out the national debt that had built up over decades.  Now it's bigger than ever.  People who have too much debt are called credit risks.  Countries that have too much debt are called weak economies.  Thanks, GW...

A price peak?  I hate to consider the possibilities.  A full blown war or natural disaster that wipes out oil wells or refineries could have catastrophic effects on our economy and our wallets.  If a Katrina-like  hurricane hit the Gulf coast again, damaging the refineries even more, $6-8 gallons of gasoline are a real possibility.  It could take years to bring a badly damaged refinery back online and the Gulf coast has several of the largest in the US.

EDIT:  If OPEC wanted to jack up prices, they could do it and there isn't a GD thing we'd be able to do about it.  Our economy is driven by petroleum and we'd pay, no matter what.  OPEC monitors supplies and demand and adjusts production to hit a target market price.  They don't set prices, they set production and the world market sets price.  That being said, OPEC is interested in making money, but also being around a while.  They shut down production and I guarantee you a war within a year.  The only thing that could start a war faster would be water supply...

Answer 3

Stop blaming people for our problems!

Look around you, what do you see? Waste.

When you are sitting in the drive thru at the bank, waiting for 15 minutes before your turn, what is your car doing? Idling.

When it is cold in the morning what do you do with your car? Idle it to make it warm.

When you just run in the store for a minute, the car is idle!

If we all made changes in our own personal lives, everyone of us, we would save millions of gallons of gas. It is unnecessary to idle cars and burn gas at 0MPG. It lessens the life of your car, increases emissions, and make a bigger demand for gas.

The bigger the demand, the higher the prices! Buy oil that you can change every 35,000 miles. Changing your oil every 3,000 uses unnecessary oil and also adds to the demand.

Electric at your home uses oil, or coal in many electric power plants for burning or transportation. Unplug all your electronic when you're not using them and you will save a tremendous amount of energy. Yes electronics use power when turned off, some use a lot of wasteful power.

Answer 4

Oil is a nonrenewable resource.  Its price will only go down if one of the following happens:

1.  world population stops growing

2.  other countries stop industrializing

3.  there is a significant reduction in demand for gas (for example, if several cities build public transportation systems or a significant percentage of people switch to hybrids)

4.  we find another source of energy to power cars (like H2 fuel cells)

#1 and 2 are not likely.  3 is possible, but only to a small extent and will not make a big impact.  4 is at least 20 years down the road, if not more.

So my answer to your question is that gas prices will continue to go up for the foreseeable future.  There will be fluctuations, and the rate of increase will constantly change, but the general trend is going to be up for a while.

Answer 5

the oil companies are talking the increases where originally due to the destruction of the refinerys in new orleans. ( yet the oil from new orleans only accounted for 3% of the nations fuel) Now they are saying its costing them more to refine and ship the fuels then it used to. the incidents overseas are not having a major impact with gas prices due to the fact the federal governments have not placed an additional tax on fuel ( although several states have ) they are saying there is going to be an 80 cent increase by memorial day though. The major thing with the fuel prices is that the gas companies are having record profits right now ( approx 6 million increase since 2000). And if you remmember gas prices did not increase until katrina hit and since then gas has not dropped down to the old prices even though the refinerys in new orleans have reopened and are fully operation.The problem lies with the major gas companies working together to increase the fuel prices atthe same time and not individually which would be illegal ( its against federal laws to increase prices without reason if your the only one that provides a needed service) the gas companies keep telling congress different reasons why the gas prices need to remain high and therefor they are not being forced to bring gas prices down. Some experts are saying that by 2010 we will be paying around 6 dollars a gallon regularly. the reason i think that the gas prices will not increase when the operations overseas are done. however i do believe once the iraqi government can employ enough people the gas prices will drop a little. reason being is there are over 100 oil wells in iraq. only one is operation because the iraqi government can not afford or find enough people to operate the other and guard the pipeline. we can not sent enough troops to do this either reason being that it will cost to much and then other governments of the world may see that as something its not and it could create more problems than we can handle

Answer 6

Unfortunately not. The prices will continue to rise until ppl curtail their driving, and oil company profits decline. Often the fuel prices in Europe are cited as a compairason, but the difference is the amount of taxes collected, that's what pays for all that great mass transit there. The other issue here is the devaluation of the dollar. As our currency devalues, we will continue to have less and less buying power, thus prices we pay will continue to rise. Fuel sipping cars and expansion of transit, are only small steps, there must be a fundimental shift in American values, and housing laws.

Answer 7

I think Justin has said it all!! But I do believe that there is a lot of lying on the part of the oil Co. They have it&we need it! The demand is there&they know it!! I dont think it will ever really go down again!! Just small drops down&then back up!! To many greedy people in power in the oil busness!! With to many powerful people in their pockets!!

Answer 8

Personally I'm not very sure if gas prices will ever go down yet I'm remaining hopeful, and as far as prices peaking from what I've heard there is no guarantee when prices will actually hit a peak but I know once summer gets here gas will go higher,  I want to say for peaking gas prices there may never be an end,  you seen the news truck drivers are parking their rigs since diesel prices are getting so expensive and that's $4.00 a gallon if not better, personally I think gas prices are going to hit $4.00 and it hurts to say that, but we watch and wait all I see is gas going up, then it drops a few pennies and a few dimes,  gas might never drop back to a good price again. I mean as expensive as its getting $2.50 a gallon would be awesome.  Sorry if my answer couldn't be any better that's all I can think of.  Lets just hope and keep our fingers crossed maybe one day well get lucky and the price will start going down.  Also the economy being so awful isn't going to help either.

Answer 9

Prices will most likely keep going up unless the following occur : oil companies are allowed to drill in new places, oil companies are given more freedom and less taxes, or if environmentalists and the government loosen restrictions. These will not happen.

As for causes for higher taxes. China and India are growing and consuming gas at an alarming rate. Basic market principles dictate if supply is constant and demand goes up, prices will increase. If the demand goes up then we will have to pay more. Stricter regulation on oil companies will also increase price as will higher taxes. Finally, if the government takes away incentives from oil companies by taking profits and placing them in an energy fund the prices will skyrocket since efficiency and motivation will be lost.

In short, cutting gas companies some slack will decrease gas  prices. Punishing them will result in an abnormally high increase in prices.