In the busiest travel time of the year, gas prices continue to plummet throughout the United States. Many Midwestern states have seen huge declines in prices. According to the American Automobile Association, many of the Midwestern States have seen sharp declines in gas prices. In states like Ohio, Kentucky, and Mississippi, they have fallen at least eleven cents per gallon, and Missouri gas prices have averaged the lowest in the entire country as of late November. Over the past month, the state’s gas prices have dropped about 40 cents per gallon, and many areas have seen prices below $2.00 a gallon.
Why this sudden change in behavior? The average price per gallon between May and October of 2018 has seen relatively high gas prices, and with the holiday season following October, most would agree that gas prices usually rise due to the increase in travel. In fact, during Thanksgiving break, gas prices dropped to their lowest point since 2009, so again, why would they suddenly drop?
Several factors come into play regarding the economics of gas prices. Most of it has to do with the Organization of the Petroleum Exporting Companies, which supplies 1/3 of the world’s oil, production prices with Saudi Arabia, and crude oil supply in the United States, although the exact math is hard to calculate.
Back in 2010, America saw a sharp hike in oil prices which sparked a movement to increase crude oil production in the States. As of last year, America was the largest producer of crude oil in the world. This means that instead of competing with foreign nations for better gas prices, oil companies can sell directly to the U.S. However, most of this oil is sold to European and Asian countries, and with the number of hybrid cars skyrocketing in those countries, the demand for oil is low. This, in turn, creates a high supply that can be sold in the U.S. more readily.
Because of the U.S. sanctions on Iran in early November, Russia, Saudi Arabia, and the United States have all boosted oil production to brace for lower Iranian exports of oil. President Trump gave much credit to Saudi Arabia for lowering their price-per-barrel, but Russia and America have both played an important role in this too.
As for future speculations, some experts predict that prices could continue to fall while others predict the contrary. In December, OPEC will have a meeting regarding oil production, and rumor has it that they will slash oil production by 1 million to 1.5 million barrels per year to bring the prices back up. As anticipated, this idea has sparks backlash throughout the world for manipulating global gas prices, but OPEC’s argument is that there is a shortage of crude oil coming up in the future, and that they need to conserve the amount of oil that is produced.
In short, the future is unclear. Prices could continue to decline even until the new year. Or the other possibility is that Saudi Arabia will reduce oil production—against the will of President Trump—and that OPEC will follow in its steps to decrease production. Regardless, enjoy low gas prices while it’s here!