Oil and gas prices are known to rise significantly in the summer, and this summer appears to be no exception. Have you ever wondered why oil and gas prices continue to rise, despite increased levels of production and a booming oil industry?
This article argues that governmental policies have restricted the development of US-based oil production, keeping prices high for the average American. The good news is that prices are expected to drop in the near future due to lowered demand and increased supply.
Rising Prices and Policies
Former President George W. Bush and President Barack Obama have created policies that force major car manufacturers to design more efficient cars that provide a higher miles-per-gallon, which may help lower demand and gas prices in the long term. However, the government has also blocked American energy companies from obtaining the land access they need to produce oil and gas on US soil. This causes America to be subject to prices set by the Organization of the Petroleum Exporting Countries (OPEC), even though the US has enough oil shale to last two centuries or more.
Oil and Gas This Summer
The demand for oil and gas is likely to soon fall. This is because the temperature this summer is expected to be cooler, and fewer utilities are being switched from coal to gas. In spite of this fall in demand, natural gas prices will rise this summer compared to 2012.
Gas production will also be far higher this summer, according to Natural Gas Supply Association. New processing plants and pipelines are being constructed to carry natural gas from previously inaccessible regions, like the Marcellus Shale. Governor Rick Perry in Texas and the State of North Dakota are leading the effort to expand pipelines in the US.
A Plunge in Oil and Gas Prices in the Future?
According to the International Energy Agency, we are about to witness a period of exceptionally low gas prices. The period will last for five years, and estimates for the plunge vary. The relief will be the result of a higher spare capacity and an increased number of oil fields. The current spare capacity is 3,000,000 barrels a day across the planet, and it is expected to increase to about 7,000,000 barrels a day by next year. It will continue to grow in the future. The current demand for fuel is equally balanced by supply, but in the next few years, supply will likely outpace demand.
According to Citigroup, we may witness oil prices of $80 a barrel through 2017, when the price could drop to less than $50.
Certainly, governmental policies bolstering US-based gas production infrastructure would likely have prevented the oil crisis we have suffered since the early 21st century. With an increase in production, however, coupled by a projected fall in demand, this crisis may soon be righted, relieving the pressure on many American families who rely on oil and gas every day.
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