Why Do Gas Prices Change So Often, and What Can We Expect in the Future?

The price of gasoline has a way of making its mark on our collective memory. Can you blame people if they get attached to the feeling of a few extra banknotes in their wallet? It is curious, though, the way gas prices fluctuate. Typically, we think of consumer goods gradually increasing in price at a fairly comparable rate, but gas prices don’t subscribe to that logic.

There are any number of conspiracy theories out there about who’s controlling oil and what we can expect for the future. In reality, no one can be certain exactly what the market will do, and part of what drives fluctuation is consumer confidence itself. There are, however, some reliable indicators and trends that can give us insight about when it’s best to fill up.

Supply and Demand

The two basic market forces are still at the heart of how the world buys crude oil and the gasoline that comes from it. After a rise in gas prices that peaked around 2011 with prices of $4.00/gallon or more in some areas, new methods to expose oil deposits have driven prices back down to a comparatively low average, less than $3.00/gallon.

American oil production has been particularly strong in the last half-decade, owing much of the increased production to new fracking operations in North Dakota. Add to that a lowered demand from the Asian continent and the Saudis’ unwillingness to allow production to falter, and you can understand how we’ve ended up with a relative surplus of oil.

Seasonal and Regional Differences

You might notice talk of “summer driving season” and prices that are higher for urban areas than rural ones, and these are all real factors you can plan around to some degree.

There are two gasoline “blends” that vendors offer — not like the premium, mid-grade and regular stuff you’ve seen — summer and winter-flavored fuels. The summer-grade gas burns cleaner but costs slightly more. In places with historically bad air quality, like California, you pay extra more months of the year because winter grade is only offered for a short stint.

Refineries have to change things up to produce the different grades, so supplies get low between seasons, which can cause a short blip in prices. There are also exceptions in places like Hawai’i where folks pay a premium to have gas shipped out.

Long-Term Predictions

Many experts feel that without another significant advance in technology, the fracking operations in North Dakota can’t hold out much longer than a few years. With Saudi production unpredictable given the potential for their reserves to be tapped after trying to stay with the market, gearing up for price increases in the next decade is probably a good idea.

When American oil became cheap again, there was a concern the public would abandon green technologies and rush back to Hummer dealerships. This resurgence of fuel-thirsty vehicles didn’t manifest as severely as it could have, and many automakers continue to pursue fuel-saving techniques like hybrid and electric cars. In fact, consumers are currently avoiding SUVs despite the low fuel prices.

It’s impossible to know what changes in the geopolitical landscape will bring, but oil is a finite resource in the span of our lifetimes, and the safe bet is on it eventually getting scarce.

From Scott Huntington, a guest NMA blogger who is an automotive writer from central Pennsylvania. Check out his work at Off the Throttle or follow him on Twitter@SMHuntington

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