Jan. national gas average low, slight price increase in Feb.
February 26, 2015
Drivers have received a break lately, with the slowly lowering gas prices making fuel stops a little less painful across the country.
The talk about fuel has been shifted for a short while away from the need to go green and get more hybrids on the road to what exactly these lower gas prices mean for the economy, and, especially, how long we can expect it to last.
According to AAA’s Fuel Gauge Report, the national average price of gas for the month of January was $2.191 per gallon or regular gas. A year ago, the national average for the same gas was over a dollar more at $3.269. While the prices have been climbing again this week after the historic 123 day slide, there is still a slight euphoria around fueling stations.
The national average has increased slightly since the end of January, though, with AAA reporting that the “National average price for regular unleaded gasoline has increased every day since January 27 for a total of 22 cents per gallon over 22 days. Today’s average price of $2.26 per gallon is seven cents more than one week ago and 19 cents more than one month ago.”
The report added that “Consumers are still saving $1.10 per gallon at the pump in comparison to this date last year, a spread that has slowly started to narrow after widening to as much as $1.25 per gallon on January 26.”
Professor Amy Schmidt, Chair of the Economics and Business department explained that low prices are partially due to increased supply: right now, there is increased production in the United States, making it easier to lower prices.
Another reason is political competition. According to a recent New York Times article, Saudi Arabia, the biggest producer of oil in the Organization of Petroleum Exporting Countries (OPEC) has recently expressed willingness to help gas prices down, partially because of the harm it would do to Russia.
Not a member of OPEC, their economy has been sorely injured by the reduced gas prices.
However, Saudi Arabia may be using their control over the oil market to pressure Russia into ceasing their aid for Syria’s president, Bashar al-Assad.
Beyond using oil as an international bargaining chip, Saudi Arabia could greatly benefit from preventing some of the shale oil production in the United States, Professor Schmidt added.
If the prices for oil from Saudi Arabia remain low, the shale oil production would be too costly to continue and would have to stop, giving them even more economic power.
Whatever the reason behind it, it is clear that these gas prices are not very stable.
With conflict throughout the Middle East due to Isis and unrest in countries such as Nigeria and Libya, this is completely unpredictable.
Americans can hope that the prices will not go back up until it has done the economy some good.
Oil producing areas such as North Dakota and Texas have been suffering from this, and fracking equipment producers have had to lay off employees, but much of the country could see real improvement.
Professor Schmidt said that “With more money left over at the end of the week, people may go to a restaurant or use it to buy whatever they have been saving up for that much sooner.”
More money in American pockets means more money in flow, creating a slight economic boost.