The average U.S. gasoline price hovered around the $4 mark last week, but experts predict relief by summer, reports North Carolina’s High Country Radio network. A 15 percent decrease in crude oil prices may not have affected fuel costs noticeably yet, but experts like Fred Rozell of the Oil Price Information Service predict that gas prices should begin falling soon. Once they do, the decline should remain steady.
Gas prices fall along with demand
Oil investors, who managed to drive up the price of crude in the first place, see a supply-and-demand situation at work. As U.S. consumers are planning their road trips more carefully and resorting more to public transportation for their workday commutes, fuel demands have naturally decreased. Oil supplies have continued to rise, which has driven down the price. Another potential factor is that because oil is priced in U.S. dollars – and the dollar has risen of late – foreign investors have found oil less appealing. So while the price of crude oil has fallen to less than $100 per barrel for the first time in two months, the higher value of the U.S. dollar has scared away some who would normally buy with foreign currency.
Consumer gas demand has not risen with economy
Dan Kaffine, an assistant economics and business professor at the Colorado School of Mines, told NPR that he has seen research that suggests significant change in consumer behavior.
“There is a broad [base of] literature out there that says that, in the short-run, a 10 percent increase in price will lead to roughly a 1 percent decrease in consumption,” said Kaffine.
Numerous economists had predicted that gasoline demand would return to previous levels as the economy began to improve, but that trend has yet to occur.
Worldwide, oil consumption is growing at an alarming rate, particularly in high-growth areas of the world like China and India, says Aaron Brady, director of global information company IHS-CERA’s Global Oil Research Team. If this trend continues at its current pace, falling U.S. gas prices may be merely an aberration on the road to an unprecedented gas price explosion.
Big oil CEOs have seen this coming for years
In 2009, ExxonMobil CEO Rex Tillerson stated during an Economic Club of Washington speech that improved MPG standards, the rise of hybrid vehicles and increased use of ethanol have all led to lowered gasoline demand. However, an emerging factor that may be even more significant in the decline is the aging baby boomer population. According to the U.S. Census Bureau, the 65-and-older age group is the fastest-growing segment of the population. Retirement, declining vision, decreased reaction time and arthritis all tend to translate into less time behind the wheel.