Consumer Price Index: Are high gas prices a thing of the past? (+video)
The US average gas price is $3.22 – and appears headed lower. The bad weather this winter was a factor, but 'fracking' is also driving energy prices downward.
The Consumer Price Index remains unchanged for the month of November, held down by low gas prices.
Gas prices have dropped almost every day for the past three weeks, and on Nov. 12, gas prices reached a multiyear low of $3.18 per gallon, according to the AAA Fuel Gauge Report. The average national gas price this week is $3.22.
Gasoline prices, adjusted for seasonal inflation, fell 1.6 percent in November, and 2.9 percent in October, according to the CPI report from the National Bureau of Labor Statistics.
This winter will likely see the lowest gas prices since the winter of 2011-12, says Tom Kloza, the founder of Oil Price Information Service, a company in Gaithersburg, Md. “Four dollars and higher are going to be rare and represent more spikes for the rest of the decade,” he predicts.
The reprieve in gasoline prices is, in part, thanks to the increased supply of oil and natural gas from the “shale revolution,” says Phil Flynn, a senior market analyst at the Price Futures Group in Chicago. Drilling into shale reserves, a controversial process commonly known as “fracking,” has insulated the United States from international spikes in energy prices, says Mr. Flynn.
“The era of high energy prices, or at least high gasoline prices, has come to an end,” he adds.
In November, the United States produced more crude oil than it imported for the first time in nearly 20 years, according to the Energy Information Administration. However, the US still has a few years until it is energy independent: An estimate from the International Energy Agency predicts that the US will move steadily toward meeting all its energy needs from domestic resources by 2035.
Refineries have an incentive to produce more gasoline, because they can buy oil at a cheaper price in the US than almost anywhere else in the world, says Michael Green, a spokesman for AAA.
The US will feel occasional gasoline price spikes, since it is still importing oil, but the country is much better insulated from outside factors than in the past, Mr. Kloza says.
In May 2011, gas prices spiked to $3.97 a gallon after the price of gasoline rose 80 cents a gallon after February. The runup was caused after the civil war in Libya reduced oil supplies and then flooding on the Mississippi River resulted in unexpected refinery outages.
The dip in this year's oil prices reflects not only a move toward energy independence, but also factors a bit harder to anticipate: For example, this year there was no major hurricane and the refineries ran fairly smoothly, says AAA's Mr. Green.
Moreover, a variety of seasonal factors are at play in the oil price dip as well, he adds.
In fall and spring, refineries usually do maintenance. With the onset of winter, the refinery maintenance season has ended, allowing more refineries to produce more gasoline.
Bad weather has also helped to keep gas prices low, says Green. The bad weather during the past few weeks has reduced the demand for gasoline – perhaps both good and bad news for holiday travelers.