It was just a decade ago that gasoline prices in the U.S. crossed the incomprehensible $4 per gallon mark. If you were driving back then, you know those were scary times. Many people became quite worried that this was the beginning of an inflationary period that could see gas go to $10 per gallon or more. Like we said, scary times.
And automotive and truck consumption changed quickly. Overnight, the “conventional wisdom” of citizens being more or less unconcerned about petroleum costs shifted to a new mindset; It was time to ditch our gas-thirsty trucks and SUVs and move to electric and hybrid cars. And as soon as possible.
Well, 10 years later, it appears that this conventional wisdom was wrong. The price of gasoline didn’t go much higher and today, well, gas is cheap. The best news is that according to many petroleum experts, its likely to stay that way for quite a while. Here’s the story.
The End of Pessimism
Back in the early 2000s, peak oil theorists, environmentalists, pessimistic economists, and others were convinced that oil was running out, scarcity was coming and the battle for world resources was about to begin. No one was predicting that gas prices, adjusted for inflation, could possibly ever decline to near historic lows. And yet, that is what we have today. Here’s why.
Back in 1956, while working at Shell Oil’s lab in Houston, M. King Hubbert, Shell’s chief engineer, predicted that oil production in the United States would peak at some point between 1965 and 1971. And after hitting that peak, all of America’s oil production would begin and slow yet steady decline. As it turned out, most of America’s oil field did peak in 1970 and Hubbert’s scientific methods were extended out to oil production facilities across the globe. The results were sobering – all the world’s oil wells were going to hit “peak” in the early 2000s and decline after that.
But the development of advanced oil harvesting techniques, like hydraulic fracturing (fracking) and other methods resulted in a radical increase in the world’s oil production. In fact, from a low of 5 million barrels a day in 2008, oil production in the United States has steadily increased. Today, America is producing more than 9 million barrels of oil a day.
And its going to stay that way for a while
The federal government’s Energy Information Association (EIA) expects U.S. oil production to run at the 9 million barrels a day for at least another decade. It should be noted that 9 million barrels a day is still not enough to meet the country’s consumption (we do import some oil), but it is enough to knock back oil imports to their lowest level since the 1990s. And while America is producing more oil for its own use, the rest of the world is pumping as fast as they can. They need the money. Governments in countries like Russia, Iran and Venezuela depend on oil revenues and can’t afford to not export as much as they can. And Saudi Arabia, long the lowest-cost and largest producer of crude has increased their production too. Today, the world is awash with oil.
Demand Has Slowed
And Americans are using less gasoline than they used to. In 2007, the country burned through 142 billion gallons of gasoline — just about twice what we used in 1967. But with the economic slowdown of 2008 came a drop in usage to 138 billion gallons. And by 2015, when economic activity was supposed to be increasing, that number had dropped down to 131 billion gallons. We have started to use oil more efficiently and hopefully will continue to do so.
Plus, our subject matter experts at http://www.chryslerofculpeper.net/ bring up a good point, demographic changes live are reducing demand as well. As the baby boomers age into retirement, they use less gasoline. And younger Americans are increasingly moving into cities where public transportation is more accessible and services like Uber and Zipcar make owning your own vehicle less of a necessity. Throw in slower growth in countries like China and India, and World demand for oil products has slowed down from hysterical heights.
Of course there will be price fluctuations in the future. There always are. But barring some unforeseen event — political upheaval in Saudi Arabia or widespread war in the Middle East— oil should find a relatively low, stable price point and stay near there for quite a while. Some think that this good news should not be squandered, though. At some point oil is going to become scarce and we should have realistic, alternative energy technologies ready to go.
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