Why Gas Prices Aren't Soaring
By Brad Tuttle @bradrtuttleSept. 04, 2013
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American drivers have come to expect that strife in the Middle East equates to a spike in gas prices at home. It looks like we're about to bomb Syria. And yet gas prices haven't jumped — and analysts say they probably won't. In fact, all signs indicate that prices at the pump will plummet, perhaps by more than 20%, in the months ahead.
Like clockwork, trouble in the Middle East means soaring oil prices—and soaring gas bills for drivers. At least, that's what we've been led to believe. And, as Syria tensions mount, there has been some speculation that gas prices could hit the roof.
According to the AAA Fuel Gauge Report, the national average for a gallon of regular rose about 5¢ over the past week, and in states such as Michigan, prices went up 11¢ on average. While unwelcome, such rising prices aren't particularly surprising considering that the Labor Day holiday weekend often causes a surge in demand (and prices). What's more, average national prices are slightly cheaper (2¢) than they were a month ago, and the average as of Tuesday ($3.59) is nearly a quarter per gallon cheaper than it was a year ago at this time ($3.83). Even after the price hike at Michigan gas pumps, the state's current average, $3.72, is still 32¢ less expensive than it was during Labor Day 2012.
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There are a number of factors at work that are resulting in gas prices not going haywire and reaching the highs hit 12 months ago. "There are a lot of things beyond the Middle East that should act to keep gas prices temperate," the oil industry analyst Tom Kloza told CNN Money.
To put things in perspective, August and September of 2012 were very unusual, with record high gas prices around the nation. Drivers in many states were paying around $4 per gallon or higher at this time last year; by comparison, a national average of about $3.60 lately seems reasonable.
Drivers may be less enthusiastic about prices at the pump when realizing that, were it not for the pending U.S. military action Syria, gas prices would probably already be on the decline, thanks to seasonal drops in demand and the introduction of cheaper winter blends of gasoline. And regardless of the season, demand has been dipping. The rising fuel efficiency of cars, combined with the fact that Americans are driving less, means that the nation collectively uses less gasoline on a day-to-day basis. The Fiscal Times cites experts who say that American drivers could soon get down to consuming 7 million barrels of gasoline daily, down from the high of 9 million barrels.
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Because Syria isn't a particularly big producer of oil that's imported to America, and because the U.S. drivers are increasingly pumping gas that comes from somewhere other than the Middle East, it's looking like the trouble in Syria won't translate to pain in American drivers' pocketbooks.
In fact, "my instincts tell me we're going to move lower" in terms of gas prices, Kloza, chief analyst of the Oil Price Information Service, told the Fiscal Times. He's forecasting a national average of about $2.90 per gallon of regular by the end of 2013.
Brad Tuttle @bradrtuttle
Brad Tuttle covers business and personal finance for TIME. He lives in Massachusetts with his wife and four sons, and also teaches journalism at UMass-Amherst.