We’ve all noticed it. The price of a gallon of gasoline always seems to be increasing. Can’t we catch a break? Will the price at the pump ever fall? Unfortunately, it’s not looking good. Even with the current boom in oil production, we should not get our hopes up for a significant drop in prices any time soon. Why is this?
In an article from the Washington Post, Author Brad Plumer explains, “The big thing to remember is that oil prices are a function of both supply and demand. If world demand for oil rises faster than producers can pump the stuff out, prices will go up. And that’s what is happening now.” Although the world is producing more oil than ever before, demand for this resource continues to soar.
For the majority of 2012, world petroleum production averaged 88.8 million barrels per day, 2 million barrels more than in 2010. The International Energy Agency projected that oil production in the U.S. will continue along this path until 2020, possibly even longer, because of companies that are extracting “unconventional” oil from shale rock and other sources. The downside is that global demand is expected to increase 35 percent by 2035, which does not do anything to help the price of gas.
As China becomes the largest oil-importing nation, reports have shown that this is where almost half of the 2 million-barrel-per-day increase ended up. The U.S. Energy Information Administration found that China boosted its petroleum consumption by roughly 500,000 barrels per day in 2011, and another 420,000 barrels per day in 2012.
Since 2010, oil production rose by 2.3 percent, but the world economy has increased by 7.1 percent. Judging by these statistics, the world is not producing the amount of oil needed to match the rise in global incomes. Many feel that the reason why prices haven’t skyrocketed to outrageous levels is because countries are slowly becoming more efficient by carpooling, taking public transportation, and purchasing more fuel-efficient cars.
Spokesman for AAA Carolinas Tom Crosby said, “Prices have climbed steadily over the past month for the longest period in two years.” In many areas of the U.S., prices jumped about 30 cents from January to February, and currently settle around $3.75 per gallon. The way most states are headed, residents will likely see $4 per gallon by summer, if not sooner. “Speculators in future oil prices are already sniffing an opportunity and if they become optimistic that the $4 barrier can be reached and overcome, they will start investing heavily in oil futures and the prices at the pump will reflect that,” he added.
As we see the summer months approaching, we also see gas prices rising. Although this may be typical as the seasons change, no one wants to pay $4 per gallon, or worse, even more.