Gas Prices Continue To Drop
Almost as quickly as gas prices climbed last summer, they are now in full retreat having recently broken the $3 per gallon threshold and selling below $2.80 for regular gas on the national level. Prices in some areas of the country are much lower, led by Wichita which is seeing regular gas selling for $2.15 a gallon.
Clearly, there is one thing now within reach that many motorists thought was long gone: regular gasoline will soon be selling for $2 per gallon, even much less than that in some areas. Let’s take a look at how and why things have shifted so dramatically and what we can expect in the months ahead.
The Volatility of Gas Prices
Gas prices are volatile, thanks to several factors. Speculators play a significant role in driving prices up or down, global demand has increased sharply, and seasonal changes in supply and demand are also a factor. What we’re seeing now is speculators holding back, demand dropping, and the usual seasonal shift in consumer driving habits in the US from summer driving to more localized trips.
Together, these changes have pushed down the price of a barrel of oil which had peaked around $150 earlier this year. Today, oil is selling for less than half that amount, clearly showing that $4 per gallon gasoline can easily become $2 per gallon gasoline in the near future.
When Will OPEC Intervene?
Likely, prices will retreat a bit further before OPEC (Organization of Petroleum Exporting Countries) intervenes and cuts production. They’ve been threatening to do this for weeks and have even asked non cartel countries to cut production too. Definitely, if prices continue to drop, the oil producing countries lose wealth, something they’ve each become highly dependent upon over the past few years.
My prediction for gas prices is this: we’re nearing the bottom of the price cycle and that should be reached as soon as oil prices stabilize. This stability will only take place through cartel intervention, but it may not happen until prices dip to $60 a barrel. That means wherever you live you can take another 50 to 60 cents off of the price of regular gas before prices stabilize.
Gas Prices Will Certainly Climb Once Again
Look for prices to stay down until next Spring when the summer driving season kicks in. Prices will quickly rebound, climbing up past $3 per gallon, perhaps as high as $4 again. OPEC seems interested in keeping oil between $70 - $90 per gallon, but if that ceiling is breached, then all bets are off.
So, if you’re tempted to jump in and buy that truck with a big V8 engine, don’t count on gas prices of $2 per gallon for lasting beyond a few months time. We’ll see high gas prices again, demonstrating that prices rise and fall as temperatures heat up and cool down.
