Why are oil and gas prices dropping and will the trend continue?

For the first time in almost 4 years the price of a gallon of gas has fallen below $3.00 on average across the nation, according to AAA. While consumers certainly aren’t complaining about the lower prices at the pump, many are still concerned that it will only be short-lived.

Bob Darbelnet, the CEO of AAA, said in a recent press statement that “The steep decline in gas prices has helped to make driving less expensive for the vast majority of Americans use their car every day,” adding that “many Americans are spending $10-$20 less to fill up the cars on every trip to the gas station compared to what they paid during the summer driving season.”

So when gas prices fall, people pay less money for gas at the pumps. Thank you for that keen insight, Captain Obvious.

Some of the factors that are helping to drive the price of gasoline lower were looked at recently by the US Energy Information Administration (EIA) and, according to them, one of the reasons is that the domestic production of oil in the United States has grown from 5.6 million barrels per day to 7.4 million barrels per day.

The EIA is also projecting what they say is going to be “rapid production growth” through the end of 2014 and into 2015, but admitted that the pace and duration of America’s oil production boom is uncertain.

Amy Jaffe, the executive director for energy and sustainability at the University of California, Davis says that “I don’t think consumers are out of the woods,” in terms of what’s going to happen with gasoline prices.  Jaffe added that “I think we could  see very high gasoline prices again in the next couple of years if something went wrong in the Middle East, for example.”

It seems that, even though Halloween has passed, Ms. Jaffe and Mr. Darbelnet are both still trying to win the prize for best Captain Obvious costume.

Luckily both are optimistic that the prices will continue to fall due to the combination of historic production levels right now in the United States along with a number of new, renewable energy technologies. These new technologies will, if things go well, deliver cheaper and more sustainable supplies of power more dependably.

In fact, once a breakthrough in technology is finally found regarding batteries, as far as their cost and efficiency, Jaffe believes that alternative power like wind and solar will come into its own and give the oil industry a run for its money. She even went so far as to say that, at some point in the future, many communities will voluntarily remove themselves from the local electrical grid and rely on their own alternative power instead.

That being said, the fact is that oil, and the gas prices that depend on it, is geopolitical. It’s impossible to say that consumers don’t have any more worries about the cost of gasoline going back up.

The good news is that, according to Jaffe and other experts, the price of a barrel of oil is going to drop to around $50 in the near future, and prices at the pump will subsequently fall even lower. So, for the time being at least, American consumers have something to be happy about at the gas pumps.

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