Wednesday, October 1, 2014

Have you noticed that gas prices are dropping? Here’s some reasons why

Despite turmoil across the globe, average US gas prices continue to plummet. As supplies continue to rise and demand stays flat, gas prices could stay low for some time.

To the delight of American drivers, gasoline prices are continuing to slide downwards. The national average price of gasoline hit $3.35 per gallon at the end of September, which is about 14 cents lower than at the same time a year ago, according to the U.S. Energy Information Administration (EIA).

Better yet, gasoline prices could drop further in the coming months.

In recent years it has become commonplace for many drivers to see a gallon sell for well over $4 per gallon. Why have gas prices dropped to such low levels all of a sudden?

There are a complex set of factors that determine the price at the pump, but the largest contributor is the global price of crude oil. Oil prices have plummeted by more than 17 percent since peaking in June of this year, when the Islamic State, also known as ISIL, overran much of Iraq and sparked fears of major disruptions in oil supplies. But with the advance of the Sunni jihadist group slowed, if not contained, concerns over oil eased and prices pulled back from their highs. (Related: Is This $7.6 Billion Deal A Sign of Things Coming?)

Of course, the largest supply shock comes from the United States, which continues to reach record levels of production. The U.S. is now producing over 8.8 million (bpd), the highest rate since the mid-1980’s. The EIA projects that the upward trajectory will continue, with output reaching 9.5 million bpd in 2015.

(Read the whole story here)

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