Gas prices projected at all-time lows for 2016
Life is easier for Utah State University students at the pump, as gas prices continue to fall and are projected to remain low for the remainder of 2016.
The U.S. Energy Information Administrative (EIA) released their “Short-Term Energy Outlook” report on Feb. 9. The report forecasts prices in 2016 at all-time lows —$1.98 per gallon, on average. The EIA’s prediction for 2016 is over a dollar less than the average price in 2014, and nearly fifty cents less than the average price in 2015.
“Nobody knows for sure if the prices will stay low, but the experts believe they will be steady for the remainder of this year,” said Dr. Dwight Israelsen, a USU professor in the economics and finance department.
Low oil prices are a result of the multi-national oil cartel OPEC increasing oil production and cutting prices in an attempt to remove American producers from the market.
“What OPEC is trying to do now is drive the price down so low that it will put shale oil producers in the U.S. out of business and remove competition,” Israelsen said. “If they can do that, then the goal is to restrict the supply of oil and drive the price up again to where they want it to be.”
Many USU students, however, are unaware of the current situation with OPEC.
“I know that we get our oil from different countries,” said Gabi Mascarenas, a freshman student at USU. “But I don’t really know why prices go up so high or so low.”
Mascarenas believes most students don’t know what affects gas prices because it’s simply not in their spectrum of concern. Michael Ryan, a Huntsman Scholar and senior at USU majoring in economics, shares Mascarenas’ sentiment.
“I think it matters in the sense of becoming an informed citizen and understanding the world around you,” Ryan said. “I think the average student won’t be affected by knowing why gas prices are so low — but at the same time, I still think it’s important to understand what’s happening in the broader world.”
Regardless of whether students understand how the global oil markets function, low gas prices will surely benefit travelling USU students.
“I feel like a lot of people are going to start driving more and take advantage of gas prices,” Mascarenas said.
Although the present situation is good, it is unstable.
“Nobody knows for sure if the prices will stay low, but the experts believe it will stay low for the remainder of this year,” Israelsen said. “Whether they fall further or not depends on if OPEC agrees to keep production at its current level.”
Currently, OPEC is producing more oil than can be refined. Such a practice will not result in any upward pressure on oil prices. Their strategy, Israelsen says, is problematic because even if OPEC drives American producers out of the market now — to the point where they can again raise oil prices with minimal competition — once the price rises high enough, it will again be profitable for American companies to produce oil, allowing American producers back into the market.
“If it is profitable in the U.S. to extract oil from shale at $40 a barrel — which it is — as soon as the price of oil gets back above $40 a barrel, those wells will open again,” Israelsen said. “In the long run, OPEC’s strategy to drive shale oil producers out of the business isn’t good.”
No matter a student’s knowledge of oil markets, the effects are felt the same. Despite uncertainty, gas prices should remain low for the remainder of the year and on into 2017, benefiting USU students.
“Times are good right now for students,” Israelsen said. “And I think that will continue for at least a year.”
— jordan.floyd@aggiemail.usu.edu