News & Updates

How long can we expect gas prices to continue dropping?

It might be a controversial technique, but there’s no denying that fracking sure can cut into prices at the pump.

We watched as gas prices dropped all through the latter half of 2014, but in early February, the price of oil seemed to suddenly rise – spurring all manner of click-bait headlines like, “Are high gas prices coming back?”

It appears that fracking is here to stay, but does that mean you’ll spend less on filling up at the pump for the next five-to-ten years? Or, are the market forces too strong to keep prices at record-low levels?

Short-term seasonal factors at work

Gas prices typically rise starting in the spring and continue through the summer, as men of a certain age swap out their winter beater for a gas-guzzling sports car. Elsewhere, families will be packing up the crossover or the SUV for the annual trek to grandma’s house or a camping trip at a nearby park. All this extra diving means more demand and higher prices.

This is also the time of year when refineries switch over from making cheaper, butane-diluted winter gas to pricier, purer summer gas. Refineries also spend parts of the spring shutting down nonessential units for inspections, maintenance and repairs.

Considering both the extra driving and cyclical changes, you should expect the low prices of the late fall and early winter to disappear until at least September.

Long-term effects of the global market

While the short-term market forces might be pushing the price of gas up, the long-term international market forces will be pushing back the other way. Writing recently for Bloomberg View, economist A. Gary Shilling said depressed economies around the world could force oil prices as low as $10 a barrel.

Shilling wrote that economic growth is slowing in China, at a crawl in Europe and actually negative in Japan. He also added that the fracking industry is still expanding, despite slightly lower profit margins. Over the past 12 months, U.S. oil production rose by 15 percent.

In addition to these tectonic plates shifting beneath the oil industry, Saudi Arabia-led OPEC announced back in November that it would not cut oil output in the face of declining prices – a move that sent the price of oil into a tailspin. Experts said the move is a calculated gamble by Saudi Arabia, which is willing to operate in the red in order to undercut both U.S. frackers and its oil-producing rivals like Venezuela and Nigeria.

Knock-on effects for our economy

If the cost of oil does continue to fall long-term as Shilling predicts, the U.S. economy, and its workers, stand to reap the benefits.

Recent sales data from Nielsen indicated that many U.S. retailers had a good holiday shopping season, fueled by consumers saving at the pump. The research firm calculated that the typical American is saving approximately $70 a month because of lower gas prices.

With consumers buying more goods and retailers saving on shipping costs, many are expecting the economy to pick up steam through the rest of 2015.

The talent acquisition experts at CAREERXCHANGE® can help you with a number of services. Contact us today to learn about how we can help you find the perfect match!

Share it