Are Gas Prices Stabilizing or Fluctuating?

on Thursday, June 2, 2011 at 10:50 AM

What goes up, must come down, and that seems to include gas prices too. Down from a high of about $4 per gallon only a month ago, June began with a national average of $3.77. This leaves the experts wondering if gas prices will be reasonably predictable for the remainder of the summer driving season, which unofficially began last weekend, or if they’ll continue to fluctuate.

Several factors, international and domestic, seem to have already influenced prices at the pump so far this year. Political instability in parts of the Middle East has been known to cause crude oil prices in the United States to fluctuate. But recently, crude oil prices appear to be stabilizing. Now at $103 per barrel, analysts think we can expect the price to hover in the $90 to $100 per barrel range for the foreseeable future. That would, in theory, stabilize gas prices for a while too, but crude prices aren’t the only factor at work.

Two separate oil leaks – one in North Dakota on May 7, and another on May 29 at a TransCanada pumping station in Kansas – forced the shutdown of the Keystone pipeline which shuttles crude oil from the oil sands of Alberta, Canada to refineries in the midwestern US and the Gulf Coast.

There’s also decreased demand for gasoline this year in the United States, thanks to people driving less (and using more fuel efficient vehicles). And if you remember anything from Econ 101, with reduced demand comes lower prices.

It’s been pretty easy to see the correlation between high fuel prices and alternatives such as public transit ridership and hybrid vehicle sales. It’s hard to say, though, what unstable fuel prices might do. On one hand, the volatility might do what high fuel prices have been shown to do. On the other hand, fluctuations in fuel prices may cause to consumers to second guess lifestyle changes like walking, biking, and using transit, or put off major purchases like hybrid or electric cars. While lower, more stable gas prices seem like a good thing, the downside is that we lose the sense of how dependent we are on foreign oil and become less likely to choose alternatives to driving.

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