Gas prices set record: 1000 days straight above $3 a gallon (+video)
Gas prices averaged more than $3.00 in the US Tuesday – a record 1,000 days in a row, according to AAA. If we have so much oil in the US, why are gas prices so high?
Never before have gas prices been so high for so long.
At $3.51 a gallon, average US gas prices were above $3.00 per gallon for the 1,000th consecutive day Tuesday, according to AAA. That's a record-long streak. And gas prices will remain above $3.00 per gallon for at least another 1,000 days, the national auto club said, barring a major economic recession.
“Paying less than $3.00 per gallon for gasoline may be automotive history for most Americans, like using 8-track tapes or going to a drive-in movie,” Bob Darbelnet, president and chief executive of AAA, said in a statement. “The reality is that expensive gas is here to stay, which is tough on millions of people who need a car to live their lives. While a few lucky drivers may occasionally pay less than $3.00 per gallon, the national average is likely to remain more costly into the future.”
At this point, perhaps motorists are all but numb to the pain at the pump. The last time the average price was under $3.00 was Dec. 22, 2010. But there's a certain paradox. Gas prices remain high even while US oil production is surging. How can that be? If we have so much oil on our hands, why does gas still cost us an arm and a leg?
In short, the price of a gallon of gas is inextricably tied to the price of a barrel of oil. That price is set on a global, not domestic market, because oil is traded in vast quantities across the globe. US demand is waning and US supply is growing, but that's just one slice of a much larger pie.
"In the US we’re getting the Bakken shale and all the other shale plays that are causing massive increases in domestic production," said Ryan Mossman, vice president and general manager of fuel services at FuelQuest, a fuel-management technology company. "At the same time, in other places there have been supply issues, so that’s been tempered."
Libya, an important player on the global oil market, has seen its output fall to a tenth of its maximum capacity of 1.5 million barrels per day. Unrest in Egypt threatens to shut down the Suez Canal, a major oil transit route. If the crisis in Syria continues to rattle other countries in the region, even more production could come offline.
Meanwhile, a growing economy and the rise of car culture in China is driving global demand upward. So while supply meets demand in the US, that's not the case across the globe. Still, added supply at home helps protect against volatility and major price shocks from unrest in the Middle East.
Another factor of elevated gas prices: the value of the dollar and central bank policies that have weakened its value.
"The only way to get below $3.00 is really around the dollar and the monetary policies in place that have weakened it against other currencies," Mr. Mossman said in a telephone interview. The monetary policy "has really been the floor for a long time."
The first time Americans paid an average of more than $3.00 per gallon for gas was in September 2005 after hurricane Katrina disrupted production in the Gulf of Mexico. It hovered above that threshold for eight days. Before Tuesday, the longest previous streak above $3.00 was for 244 days, between Feb. 17, 2008, and Oct. 17, 2008.