Prices for gasoline continue to drop at the pump, but will the price of a gallon of gas remain steady over the next year? Oil analysts say the current trend of lower prices simply reflect the weak fundamentals of the world oil markets.
The demand for petroleum products dropped sharply this year as American and European consumers and businesses used less fuel because of the economic slowdown. Meanwhile, fuel inventories swelled, filling storage facilities around the United States and forcing some petroleum companies to charter oil tankers for storage.
Oil demand typically rises in the winter, because of the higher demand for heating fuels – and vehicle fuel prices tend to rise along with overall demand. However, demand continued to decline late this year, resulting in the current downward price trend. Over the last four weeks the nation’s oil consumption fell to 18.77 million barrels a day, nearly a million barrels fewer than during the same period of 2008 and more than two million fewer than during the equivalent period in 2007, according to the Energy Department*.
Gasoline consumption has rebounded from its lows reached during last year’s crisis, in December 2008, but it is still down by about 3 percent from two years ago. Projections by analysts of where oil and gasoline prices are going beyond the next few months vary widely – not surprising since prices have been a roller-coaster ride in recent years.
Gasoline prices started at about $1.70 a gallon in January 2008 but climbed back to nearly $2.70 by June. Since then, national average prices have remained between $2.50 and $2.67. However, analysts at JPMorgan Chase expect oil prices to turn around by the end of the first quarter of 2010, and rise to $120 a barrel by 2013.
*Price trend data from Energy Information Administration (EIA)
