The price of gasoline is expected to continue to fall over the next several weeks as something like an old fashioned price war not seen in nearly 50 years breaks out in the global petroleum markets.
The average price for a gallon of gasoline is now $2.955 cents per gallon, according to the AAA Daily Fuel Gage as the price of gasoline dropped by almost a penny. Last month, Americans were paying $3.289 cents per gallon.
Meanwhile, Saudi Arabia, the world’s largest producer of crude oil, acted just like any other business that’s determined to protect its marketshare, announced a price cut, which is certain to ripple through the world’s oil markets.
The Saudi price cut is something of a tribute to the domestic oil industry, which has now expected to produce more oil this year than it has in more than 40 years when production of the fields in West Texas began to fall. The U.S. already is beginning to export relatively small exports of crude for the first time in years.
What’s next?
Experts are trying to guess how low the price of oil might go, given that crude oil was selling for $78 per barrel, according to the Federal Energy Information Administration. T. Boone Pickens, one of the nation’s notable football fans and supporter of natural gas-fired cars, boldly predicted to Bloomberg News that crude oil would not fall below $70 per barrel.
If oil prices drop below $70, the foundations of the U.S. oil boom begin to shake and crack a bit like the foundation of century-old houses and buildings in California’s earthquake zone. In fact, some analysts believe this is precisely Saudi Arabia’s goal since its oil is a lot cheaper to produce than the fracked oil from the American West.
“With U.S. gasoline consumption running at 8.8 million barrels per day and the average retail price of gasoline for all grades at $3.58 per gallon, the average American household spent $2,600 on gasoline in 2013.
If the protectionist oriented export ban on U.S. petroleum is lifted, an outcome favored by many policy makers, the price of U.S. gasoline could increase for American consumers. It probably wouldn’t happen right away but it’s one of the possible outcomes of an apparent oil glut that’s driving down pump prices.
Read the Entire Article in The Detroit Bureau.
