Written by: Joe Labs
How Low Will Gas Prices Go?
The current ‘buzz’ in the oil industry is that gas prices are even lower than they’ve been since 2009. The world currently is in abundance of crude oil, with enough extra produced to power Britain last year. Research has shown that until the glut--an excessively abundant supply of something--shrinks. With the excess amount of crude oil, it has driven the gas prices down to historic levels, which has in return has consumers paying less for gasoline than they would have before. “The current nation wide gas cost is at $1.54, which are the lowest that prices have been since 1998. Ten states currently have averages under $1.50 per gallon, and the national average could drop between 10 to 15 cents more within this month” (Addady).
As stated previously the decline in gas prices is a result of the crude oil barrel prices significantly dropping. As of this month prices of crude oil per barrel is $28, which is a 70% drop in price over the past 18 months. If the crude oil price per barrel drops below $15 we could possibly see gasoline below $1,00 per gallon, and that would be the first time since 1998 that prices would have dropped that low. The overall price of gas/oil has been dropping for the past three years now from just below three dollars now down the almost under a dollar fifty. Recently within the past two years the supply & demand haven’t been even. There has been more supply for oil than the actual demand by the consumers.
Even though the consumers benefit from the low prices of gas, this decline in cost isn’t the best for everyone. “For starters, oil-producing countries and states Venezuela, Nigeria, Ecuador, Brazil and Russia are just a few petro states that are suffering economic loss” (Krauss). With sanctions placed on countries like Iraq, their oil production have been cut, by about one million barrels a day in recent years and it has blocked Iran from importing the latest Western oil field technology and equipment. Also bigger oil companies such as BP and Chevron have “announced from this reduction in oil prices that they will cut their payrolls to save cash, and they are in far better shape than many smaller independent oil and gas producers that are slashing dividends and selling assets as they report net losses” (Krauss).
So, the main question is how low will the prices drop and how long will they stay there for? Some may be looking forward to gas prices reaching just $1 a gallon, which hasn’t happened since before the turn of the century, but that prediction could be overly optimistic. Not only would the price of crude oil have to be cut in half, but gas prices fluctuate seasonally, and they generally rise by 50 cents per gallon or more in the spring as refineries conduct maintenance. Overall, the prices of gasoline aren’t expected to drop until a dollar nationwide, but in some areas of the country you may see prices under the dollar per gallon marker. These prices are expected to stay under two dollars for the remainder of the year, with prices expected to increase during the spring and summer seasons, then prices falling after the summer is over.
Works Cited
Addady, Michal. "This Is What We Can Expect From Gas Prices in the Next Few Months." Fortune. 11 Jan. 2016. Web. 15 Feb. 2016.
Krauss, Clifford. "Oil Prices: What’s Behind the Drop? Simple Economics." The New York Times. The New York Times, 09 Feb. 2016. Web. 15 Feb. 2016.
Parietti, Melissa. "Projected Gas Prices for 2016 | Investopedia." Investopedia. 17 Nov. 2015. Web. 15 Feb. 2016.
Russell, Karl. "Why Oil Is Plummeting." The New York Times. The New York Times, 10 Feb. 2016. Web. 15 Feb. 2016.
This article was very interesting to me because, as someone who drives a car and pays for my own gas, the sudden drop of gas prices is something that has positively affected me, directly. And, though I was very excited about the lower prices, I wasn't quite sure as to why there was such a rapid and sudden price decrease; but now I have a greater understanding of it. At the end of your article, you mentioned that prices have and/ or will drop below a dollar in some areas. I am interested to know where exactly it is that prices are lower and why. Is it in cities where their are less people, making the demand lower? Or in areas where it is warmer and people tend to walk/ ride bikes instead of drive? In all, I found this to be very informative to me and, by reading it, I learned a lot of new and relevant information.
ReplyDeleteSince the gas prices have been so low lately, I have been able to go on more road trips than I would have if the gas prices were high. I wasn't aware that other countries were being harmed so badly from the low gas prices that we have here in the U.S. I remember when the gas prices were $4 a gallon a few years back. Although these high prices affected consumers negatively, they still purchased gas because they needed it to run their cars. In my opinion, I don't think that the prices will go much lower than what they are now because the oil company still needs to make revenue from all of the gasoline they are supplying. Overall, this was a very interesting article that relates to the everyday lives of many individuals throughout the world.
ReplyDeleteSince I pay for my own gas, I obviously find the drop in gas prices great. The thought did cross my mind of why they went down so quick and what effected this change? After reading your article I have a greater understanding of why gas prices fluctuate. Although, I do wonder if oil companies make more or less money with the lower gas prices since they are technically considered and inelastic good. Overall I really enjoyed your article and it was interesting to hear about the different reasons for lower gas prices.
ReplyDeleteThis was very interesting as gas prices is a huge part of the lives of just about everyone. I would obviously like gas prices to stay low, however it is interesting to note that other countries are being negatively affected by this. Also the fact that the gas prices changed so quickly surprised me very quickly. It seemed not too long ago, gas prices were ridiculously high. I am reluctant to believe that gas prices will stay this low for a very long time because I bet there has become a huge increase in demand for gas meaning that this will eventually deplete the world's supply. But I'll still take advantage of these low gas prices until the increase does happen.
ReplyDeleteFor the everyday driver in the United States, it can be said without doubt that everyone's enjoying the low gas prices; at least for now. As great as the prices are, it simply won't stay this way. Why you ask? Simply because when a barrel of oil becomes between $20-$30, these oil companies start losing money (a lot of money). If this continues, companies could run into financial issues and could lead some of these companies going in bankruptcy. If this happen, supply will decrease to then INCREASE gas prices. Regardless if this happens or not, I expect gas prices will go up to over $3 in just a matter of time. Good post Joe!
ReplyDeleteLike everyone else, I too am loving the low gas prices! I have to pay $17 dollars for a full tank of gas versus the $40 when gas was $4.00 a gallon. It's good to hear prices are going to remain low for a while at least but obviously these low prices don't come without a cost. Also, I was wondering when did people/companies stumble upon all of this crude oil because last time I heard or paid attention I guess there was a shortage?
ReplyDeleteOverall, despite some repetitiveness and a weak conclusion, I thought that your post was well written and interesting. I too am enjoying the low gas prices but in the long run, these prices will not last. As the price per barrel of oil increases, gas companies will begin to increase the prices of gas. But since gasoline is inelastic in demand, consumers will continue to buy gas at any price because they need it. So, although the price for gas is low now, it will eventually increase as the business cycle flows. Overall, nice post Joe, and I am curious to see what happens with gas prices in the future.
ReplyDeleteI'm liking how low the gas prices are right now, but I know that the prices will rise sooner or later so I'm not getting my hopes up. If we keep selling gas at this price, it will most likely rise up higher than before because we will have a smaller supply of it in the end. So we will need to wait and see what happens to the gas prices in the near future. Overall I can't see them getting any lower than $1.30 a gallon.
ReplyDeleteAs of right now the low gas prices are amazing! But is it a possibility that when it comes time for the prices to rise back up that those same big companies will charge more than is necessary to make up for the money that they lost? On top of that, how high will the prices get for gas when we run short or out of the supply that we currently have? Though were under $2 now I fear that there's always going to be a possibility that it will double that sooner than we think
ReplyDeleteThis topic was very interesting to learn more about as it is extremely relevant. Originally I did not believe that gas prices were as low as there were in 1998 until I realized inflation must be accounted for. It's truly crazy how low the price of gas per gallon has gotten and I seem to care a lot more about it now that I have to purchase gas for my car. You mentioned that big oil companies are decreasing their payroll to compensate for the higher production costs, which is an attempt to decrease the short run aggregate supply curve. It's weird how an increase in the quantity of a inelastic good can have such dire affects on economies as a whole. I wonder if other goods can have such a great affect on the economy.
ReplyDeleteNice topic. I really like that you talked about both sides of the topic, how it is considered good for us because we do not have to pay a lot, however that it is negative for producers and their economies. As a driver, gas prices being this low is awesome, but it made me think of the bigger pictures and if prices this low are really a good thing or not. But on the plus side, when price were high less people were buying gas and using alternate uses of transportation, and now more gas is being sold, therefore it is still somewhat positive for producers.
ReplyDeleteI think everyone is loving the new gas prices. But I don’t think that the prices will stay low because once the supply is gone we will need to find a new one creating the supply to go down and resulting in customers paying more to fill up their tank. I guess I just have one question from this article. What is going to happen once the supply we are using right now runs out? Overall your article was really eye opening and you did a good job.
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I, similar to everyone else who drives, am loving the low prices. However, I don't think the prices will last since the oil and gas companies need to make money. Gas is something everyone needs so people will always pay for it no matter how expensive it gets. Some companies could potentially end up bankrupt from the extremely low prices of oil, so I think the prices will eventually increase to the usual $2-3.
ReplyDeleteThis piece was very interesting to me since I have also been thinking about this as the prices drop. I would love for the gas to be under or even closer to $1, but I don’t think it will reach that, or even if it does, it will just spring back up again. Once the barrel per oil prices raise, so will the gas prices. The government has to have money to pay for the oil, so they will raise the prices of gas. Either way people need gas to get places. They will have to buy it. Eventually, the gas is going to slowly increase up. But who knows. Good job on the piece and picking something interesting to think about.
ReplyDeleteI found a couple grammatical errors within this post and I’d like to know why the cost per barrel is lower. Why are they selling them so much cheaper? The low gas prices are great, but there will come a point where prices cannot decrease to prices were in the past due to inflation. It was a good post, but there should be more on what’s making the cost per barrel so low.
ReplyDeleteFirst of all, I would also like to agree with everyone else as to how great these gas prices are, but I do know that they will increase sooner or later. As the price of a barrel of oil increases, and the gas prices stay this low, they will be losing a lot of money. They will have to up the gas prices yet again. This is not the first time that gas prices have been relatively low, and there will almost be a guaranteed rise in gas prices sometime soon.
ReplyDeleteWith cars becoming more efficient with stretching how far a gallon of gas can take them, not only is consumer interest the only thing lacking, rather cars are becoming more modern as well. However, with gas prices as low as they are, consumers’ interest should increase since they would get more bang for their buck. Every time the price per gallon drops, more consumers want to fill up their tanks because one never knows when the price may sharply rise again. It’s important to have an understanding of the trend in gas prices for consumers to maximize their next fill up, even if all of this means a lapse in an oil company’s economy.
ReplyDeleteThis was a good topic because lately the gas prices have gone down. If the gas prices continue to decrease, then people will want to drive more because they wont have to worry about spending a fortune on gas. But eventually gas prices will increase because the people that supply the gas will begin losing money and will need to increase their profit.
ReplyDeleteVery nice article! It’s really amazing what just a little more of something can do! Overall this got me thinking, what does this mean for the long run? This abundance won’t last forever so eventually the prices will rise back up, which is to be expected. But the question is, will these countries that are big on producing gas try to raise the prices even more in order to earn back what they lost over this time? Will we see some of the highest gas prices too? Another thing I was wondering was why were the gas prices so low in 1998? Was it for the same reason as now or is is something else? Again, very nice job writing all of this. In the end, I’m hoping that the prices will only rise to the ‘normal’ prices.
ReplyDeleteI liked this post, it was something interesting and new. Everyone is indeed enjoying the low gas prices and it may seem like it's a really good thing but in the end the prices won't last. The price of oil barrels is incredibly cheap which allows the gas to be cheap, at some point the barrels will increase in price and so will the gas. Another thing to consider is how the supply for oil is currently much greater than the demand. This will not stay like this for long. Either way though people will buy the gasoline because they need to have it. So enjoy the low gas prices for now as they most likely will change in the future.
ReplyDeleteSince the large gas companies are having to cut their costs of production the unemployment would increase. Specifically, the cyclical unemployment would increase because of the cuts the corporations would have to take in order to remain profitable. Before reading this article I had not thought about the effect on common people that rely on the oil business as their income. It's fascinating that the demand of consumers in the US has an impact on the jobs of people in different countries.
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ReplyDeleteGreat job on explaining both sides of the argument. The low gas prices have very positively affected me because I drive daily and have to pay for gas, but I didn't understand the consequences of this plunge in the price. The people in the United States can all be thankful that they have more money to spend, but there are people in other countries that are now without a job. A question that I have is if this many people are losing jobs, is there any predictions of oil companies having to shut down or stop production? Also, when gas was expensive there were more people using other sources of transportation to save money. Now that gas is less expensive, it can be predicted that more people are going to be driving. Is there any danger in the rise of levels of pollution in the air?
ReplyDeleteI was surprised reading your article when you mentioned there was a large supply of oil and not enough demand to match it at a point of equilibrium. I was under the impression that oil was a scarce resource lately, which is why I was (pleasantly) surprised in the drop in prices. Therefore, it does make sense for the price level of the good to drop. However, because of natural economic fluctuations, as you mentioned, it will realistically not stay at that low level, similar to economic peaks and troughs--it's a continual cycle. You did a nice job explaining the arguments, great job!
ReplyDeleteIt is amazing how low the gas prices are as of right now. In my lifetime, this is one of the lowest prices, I have ever seen. Along with that, I found this post very interesting because as a driver, I have to fill up my car with gas, so it is always great to see gas prices dropping, because then it costs less to fill up the tank. Even though the prices have been dropping, it is bad for the countries who produce oil, just as you said. It was very interesting to see both sides of the low gas prices and you did a good job explaining them. To make this post better, you could have talked about how the prices may be different based on the inflation over the years. Overall, this post was very well written and I loved seeing the two sides of the low gas prices.
ReplyDeleteWOOOW! Your article was very interesting, I would not have thought that lower gas prices would hurt so many oil manufactures. I thought it was very cool that we have such a abundance of crude oil, therefore dropping our prices so drastically. Overall, very good piece and very relevant, nice job.
ReplyDeleteThis is a good topic for an article as gas prices have gone extremely low recently. I agree that there is no way that gas prices will go below $1.00, it has been an incredibly long time since that has happened, and I don't think it will happen any time soon. I liked the information you included in this article as it backed up your main point and further strengthened your argument. Overall, it was well written and I enjoyed reading this.
ReplyDeleteI would agree with all the other people saying that the low gas prices are good for drivers who go through gas a lot and have to pay for it themselves. With personal experience with myself driving a lot and my car goes through gas really fast, the money adds up for having to get gas all the time. The info was great as it backed up the main point and you got your point over clearly.
ReplyDeleteI really liked how you used the graphs to backup your data it kept me a little bit more engaged. Another thing is that there could be the questioning of how long these gas prices will stay this low. I’m sure a lot of people benefit from this major decrease in gas prices because I’m sure a lot of transportation companies and self driving people are saving a lot more money then they normally would have spent back in 2010. I didn’t really understand the cons of having low gas prices except for maybe gas stations are not making that much income because of the low prices. But over all great explanation on this topic it really got me thinking more about his.
ReplyDeleteWhile this change in gas prices may not be beneficial for other countries, it would be beneficial to the US economy in addition to US consumers wouldn't it? Consumers will take this as a sign that the economy is doing well, which will encourage them to, instead of saving their money, spend their income on newer items, then increasing consumer spending. However it is hard to tell with the fluctuating of gas prices.
ReplyDeleteI think that this was a very good topic for a post. The gas prices being as low as they are right now encourage people to spend money on gas and take trips for the weekend. so when the gas prices are lower like this the people who sell the gas to us make more money keeping the prices low. also by the gas prices being this low people will want to spend more money on other things making the economy better.
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