REPOST: Why the Era of High Gas Prices Is Supposedly Ending Read more: Why the Era of High Gas Prices Is Supposedly Ending

 Energy Information Administration is positive about the continued growth in U.S. oil and natural gas production. But predicting the future of energy is still uncertain. This Time.com article has the details.

 

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Image Source: business.time.com

A federal report released this week 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?

This week, the Energy Information Administration released a report, the Annual Energy Outlook 2014, offering projections on energy production and usage through the year 2040. As my colleague Bryan Walsh summed up, the 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.

The average VMT by LDV—vehicle miles traveled by light-duty vehicles, a.k.a. cars—has been mostly flat for the past five years, and thanks to continually improving fuel efficiency in new cars, it looks like we’ll keep gassing up less down the road. According to the report:
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, largely as a result of slower growth in LDV VMT and increased vehicle efficiency.

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 said, per the Christian Science Monitor.

Because the U.S. is becoming less reliant on foreign energy sources, the thinking is that we’re more insulated from the fallout of strife in the Middle East and other factors that tend to cause spikes in energy prices around the globe. Consumer gas prices are expected to still rise and fall due to many of the usual market forces—seasonal demand, refinery production issues, weather—but we’re a lot less likely to be subject to the kinds of sharp, sudden increases in gas prices that have periodically hit commuters and families in recent years.

Overall, experts seem to be saying that 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.

Dr. Ali Ghalambor is renowned in the industry for his remarkable contributions in the oil and gas sector. Get the latest issues in the world of energy by following this Twitter page.

 

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About Dr. Ali Ghalambor

General Chairperson Dr. Ali Ghalambor will spearhead the 2012 SPE International Symposium and Exhibition on Formation Damage Control which aims to tackle industry issues concerning formation damage, production operations, and completion technologies. The symposium will be held at the Lafayette Hilton in Lafayette, Louisiana from the 15th to the 17th of February 2012. Internationally renowned for his expertise and remarkable contributions, Dr. Ali Ghalambor has worked with the finest universities and organizations such as the University of Louisiana, the Tenneco Oil Company, and the United Nations.
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