Yet we still pay $2.25/gallon. Why?
“Yet we still pay $2.25/gallon. Why?”
It’s not $4/gal anymore. Current prices at the pump are about the new baseline, based on the “Shale Band” for oil prices ($45-65).
The big changes globally are a lot more oil revenue and jobs in the USA, rather than Saudi Arabia or Russia, and the loss of OPEC’s ability to control oil prices, or use it as a weapon against the USA.
“Yet we still pay $2.25/gallon. Why?”
It’s not $4/gal anymore. Current prices at the pump are about the new baseline, based on the “Shale Band” for oil prices ($45-65).
The big changes globally are a lot more oil revenue and jobs in the USA, rather than Saudi Arabia or Russia, and the loss of OPEC’s ability to control oil prices, or use it as a weapon against the USA.
Most of the price of gasoline is taxes.
Gas prices also reflect the increased economic activity as the economy gets stronger.
BeauBo’s post (#32) to me is very good. I take it that, to grossly oversimplify, actually the biggest factors in medium term oil prices are (in order of effect):
1) Global demand / economy. I will take a wild guess here and estimate that it can take production 3-5 years to catch up with strong sustained global demand. It **should** take less time, but there are feedback and feed-forward mechanisms in place. In the US for example, as production ramps up, that accelerates our overall economy, which creates more demand, which in turn sustains highish prices, which... But overall, I agree with BeuaBo that there is a net gain for the US.
2) US fracking production (as part of our overall production. Probably Canadian and other sources can be added here too.) This is a VERY powerful long term force, but in the medium term global demand and OPEC production cuts combined can “beat” it. Obviously short term supply interruptions can also overcome US production, at least so long as we import substantial qty’s of petroleum.
3) OPEC & “friends” policy and production. This IS a strong medium and short term term factor, as we see presently. Over time, it “can” be overcome, especially as the global economy will cycle, but this may be a decade long “project”. It will help considerably for the US to maintain a producer friendly environment — for a decade or more. So far, we are only 1 year in, and really not even that long when one considers the very considerable “process” it takes to right the ship. I would say that the environment will be “really right” if Pres. Trump can get his way in this area over the next 2-3 years.
Keep in mind that if OPEC / Russian wishes were truly winning, with present strong demand trends, oil would almost certainly be back over $100 / barrel.
BeauBo, do you concur?