Fuel Prices to Stabilize, Drop through 2040?

Published in CSP Daily News

Analysts suggest "the era of high gasoline prices has come to an end"

WASHINGTON -- A recent federal report forecasts that U.S. production of oil and natural gas will increase for decades to come. At the same time, all signs indicate per capita energy usage—especially in terms of fossil fuels—will decrease. What does this all mean in terms of prices at the pump?

Following on the Energy Information Administration Annual Energy Outlook 2014, issued in December, Time magazine talked with several petroleum analysts who said the changes will mean flat or declining gasoline prices for several years to come.

The EIA report predicts a long period when energy production within the U.S. will rise and individual energy consumption will fall. “Energy use per capita declines by 8% from 2012 through 2040 as a result of improving energy efficiency and changes in the way energy is used in the U.S. economy,” the report’s authors stated in a press release, according toTime.

At the same time, the fossil-fuel share of total primary energy demand falls from 82% of total U.S. energy consumption in 2012 to 80% in 2040 as consumption of petroleum-based liquid fuels falls.

How does this play out in terms of prices paid by consumers at the gas station? Gas station prices follow the lead set by the wholesale rates of crude oil, and according to The Detroit Bureau, Charles Chesbrough, a senior economist with IHS Automotive, said, “We expect we’re going to see crude oil prices (continue to) fall for a while.”

Phil Flynn, a senior market analyst at Chicago’s Prices Futures Group, was even bolder in his view of the foreseeable future. “The era of high energy prices, or at least high gasoline prices, has come to an end,” he told the Christian Science Monitor.

Overall, experts are saying the average gallon of regular gasoline will sell for closer to $3, rather than the $4 or $5 once seen as inevitable, for quite some time.

Click here to read the complete Time report.