In December 2010, the nationwide average price of gasoline went over the $3 a gallon mark in the first time after a while, and it seemed that it will never go below that threshold again. Growing global demand and unrest in the Middle East have been raising gas prices over the following years, up until a couple of months ago, when they started to fall, bringing the national average to $2.99 this past weekend.
This past Saturday marked an end of a 1,409-day streak of prices over $3, much to the surprise of motorists around the country, who were taking photos of gas station signs showing prices of $2-something a gallon, and posting them on social media.
There are a variety of reasons for this decline in gas prices, but basically, it all comes down to supply and demand. Between 2010 and 2014, prices were rising mostly due to the growing demand – especially in developing countries, such as China, where the number of vehicles sold has been increasing drastically year after year – and conflicts in some of the world’s largest oil producers, such as Nigeria, Libya, Egypt, and Iraq, so global production could not keep up with consumer demand. Over the course of the past four years, crude oil prices were often hovering around $100 per barrel, but in June 2014, it fell to $82, due to increased supply, with the U.S. boosting production, along with a declining demand.
The global economic crisis and the increased popularity of alternative fuel vehicles (electric and plug-in hybrids), have led to a lower demand for gas, and with EV sales expected to continue to grow, a more drastic drop in demand might well be on the horizon.
Although EV sales still only make up a tiny portion of the overall new vehicle sales, they have been on the rise over the past few months, and as they become more affordable and as the number of available plug-in models increases, more and more consumers are expected to switch from conventional to electric cars. On top of this, gasoline-powered cars are becoming more fuel efficient, as well, with car makers trying to meet new emissions standards that are intended to reduce carbon emissions from motor vehicles. All these factors will inevitably have an impact on the price of gasoline in the future, but be that as it may, it’s not very likely that it will stay below the $3 mark for long, as oil cartels will probably try to limit the production and reduce supply to the global market in order to protect their interests.
According to the U.S. Energy Department, the national average price for a gallon of oil for 2014 will be $3.46, a five percent decrease from last year’s average.