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Source: dshort.com

 

The American Automobile Association reports that the average price of a gallon of regular gas is $3.19. (The U.S. Energy Information Administration has regular gas at about $3.26).

Since peaking at the end of July 2008 at $4.11, then collapsing to $1.65 that December, Gasoline prices have been on a wild ride. Since rallying back to almost $4 in May 2011, gas prices have been range-bound, gradually drifting lower.

There are a few factors driving this: Total miles driven has not recovered from its November 2007 highs. It is off almost 3 percent from its highs of more than 5 trillion vehicle miles driven annually. Persistently elevated unemployment of 7.3 percent means there are that many fewer people driving to work. And the pre-collapse shift to the exurbs — and their much longer commutes — suggests the trend toward ever-longer commutes may have topped out.

To put gasoline prices into the starkest relief, consider adjusting total U.S. miles traveled on a per capita basis. The chart above, via Doug Short, reveals that per capita miles driven peaked in June 2005. They have since fallen almost 9 percent. The last time we saw average annual mileage at these levels was back in 1995.

No wonder gasoline prices have been falling. At present, gasoline prices are below $3 in six states. If demand continues to drop off, we may soon see an average U.S. price of under $3.

While some analysts are applauding what this means for consumer spending, I am much more concerned with the demand side of the equation. The economy remains filled with soft spots and pockets of weakness.
 

click for interactive map
Source: <a href="http://money.cnn.com/2013/11/11/news/economy/3-dollar-gas/index.html" title="Link: http://money.cnn.com/2013/11/11/news/economy/3-dollar-gas/index.html">CNN Money</a>Source: CNN Money

 

 

 

Published at Bloomberg View

Category: Economy, Energy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “Beware of Falling Gas Prices”

  1. noncist says:

    I just bought gas for $2.79 a gallon.

  2. patfla says:

    The following article has a number of interesting things to say about the current state of the world oil market.

    “There Would Be No Iranian Nuclear Talks If Not for Fracking”

    http://www.businessweek.com/articles/2013-11-08/there-would-be-no-iranian-nuclear-talks-if-not-for-fracking

    • Marc P says:

      That headline could also read “There Would Be No Iranian Nuclear Talks If Not for Increased Saudi Oil Production.” Plus, consider how much extra money the Saudis have been making by higher prices and the extra 1 million bbl/day they have been pumping. This pays for a lot of arms and fighters in Syria in Iraq. It pays for a lot of political influence with the West. The Saudis have great incentive to scuttle the Iran talks: huge profits; expanding their Islamic extremist influence in Syria and Iraq; harming their enemy the Shia in Iraq and Iran. Israel is on board with anything that harms the Iranians and is using all of its political influence as well.

      Qatar wants to keep the Iranians down because both countries pump natural gas from the Pars field. Less for Iran means more for Qatar. Qatar and Bahrain want a gas pipeline across Syria to the Med.

      There is a new oil pipeline planned from SE Iraq across Syria to the Med. The first phase is already under construction. A new oil pipeline and a new gas pipeline across Syria would give the Arabian Sunni a long-term transportation cost advantage over the Iranian Shia.

      These facts seem to lead to the conclusions that there will be no deal with Iran, at least not one that will allow Iran to produce much more oil and gas. Syria will fall; the new pipelines will get built. The radical Sunni will continue to gain power in Iraq. The American President (Bush, Obama, and whomever follows, especially Clinton) will continue get led around by their nose.

      However, oil prices will be whatever the oil oligopoly wants them to be. What the article leaves out is that oil prices are only loosely correlated with world demand, which can be shown by any chart comparing the two. Supply is managed by the oligopoly to determine price. And some of that management is to keep Iran down. Nothing is likely to change that, least of all America producing an extra 2 million bbl/day out of a world supply of 89 million bbl/day.

  3. gman says:

    Interesting trend that I have been following for some time. Counting drivers as “16 and older” may be a bit misleading because we have a mushrooming population of people who fit that metric that no longer have licences in high numbers …the 85 and up set.

  4. Angryman1 says:

    Correction, the Unemployment rate is 7.1% in October. The headline rate was shutdown influenced. I have it down to 6.8-6.9% by January. Looks like unemployment is consistantly falling now and it is the biggest lag on the block.

  5. Mike in Nola says:

    Barry, just wanted to point out the confusing structure of this post. I started on the Big Picture and when I went to leave a comment found they was disqus login required before realizing that I was on a different site.

    Will not help the blog.

    On the substance, it probably should have been lower than this before, but between the trading desks keeping oil prices high and the oil refiners doing the same, it’s the usual extraction of wealth from the public for the benefit of the few. For example, WTI recently went up 10-15%. No more demand, just people making money on headlines about the middle east. Well, not people. Big institutions.

    • The Window Washer says:

      WTI has been going up to match Brent as pipelines have been “reversed” to get fracked oil to the international market. International risk rises WTI because it’s a safer source, complain about Europeans buying more WTI.
      We’re oil companies manipulating WTI lower for their benefit for the last few years?
      Become part of the “few” to benefit and buy an oil ETF.

  6. stonedwino says:

    Some other factors to consider: Many young Americans not even bothering to get a driver’s license – joy riding is out. People trading in cars for much more fuel efficient ones. Going back to 2008 my wife and I both traded in our V8 guzzlers for very fuel efficient V6s and cut fuel consumption by 50% immediately. Surely many more Americans have been doing and continue to do the same. Even pick up trucks are 30% more fuel efficient than 5-6 years ago. Hybrids offer even greater demand destruction for oil as well…slowly.

  7. econimonium says:

    There are two interesting things to look at in this context also – the percentage of the population in the workforce, and the percentage of the population that’s 65 and over. Those, too, are both related as the boomer segment retire and drive less. Coupled with the trend of recent younger demographics to opt for more urban living and the figures for new car purchases by the same groups, I think there is a shift going on that will continue to cause demand slack on gas which may not be a direct indicator of economic stress. I think Bill McBride over at Calculated Risk has been talking about this for a while now.

  8. a guy called john says:

    No problem there, Barry. Yesterday I pulled into Champaign, IL, and saw regular for $2.79. Today when I left it was $3.29.