Gas prices: why $2 gas isn't happening anytime soon(Read article summary)
Gas prices rose 4 percent in the US this week, according to AAA. Despite a boom in North American oil production, gas prices won't be approaching $2 anytime soon.
U.S. gasoline prices are expected to remain volatile for the month because of geopolitical fallout in the Middle East. Concerns over the global oil supply are fading away from the minds of most consumers and few people care even less about the unrest in Egypt. A weekend survey said gasoline prices were in decline, though that did little to ease the minds of American commuters scratching their heads at the pump during the first major heat wave of the season. A year ago, American consumers were paying substantially less for gasoline. While U.S. oil production gains mean fewer imports, there appear to be few guarantees for energy security, and lower gasoline prices, in the near term.
Motor group AAA reports an average Monday price for a gallon of regular unleaded gasoline of $3.61. That's more than 4 percent higher than last week, which translates to a 2 cent increase every day since July 8. A weekend assessment from Lundberg Survey said gasoline prices declined by less than 1 percent compared to last month. The U.S. Energy Department said it expects gasoline prices for the season to level off at around $3.50 or so, though that's still higher than the $3.39 average reported year-on-year. (Related article: BP to the Rescue for Midwest Drivers)
Former House Speaker and presidential hopeful Newt Gingrich said a then-struggling U.S. economy can't afford to spend billions of dollars overseas to buy foreign oil when there was plenty of that Texas tea at home in the United States. Gasoline prices, he said, could drop to $2.00 per gallon if drilling activity increased dramatically in the United States. A year later, nearly 90 million barrels of oil was produced worldwide and almost half of that came from new drilling operations in the United States. Gasoline is still nowhere near $2.00 per gallon even though the United States is mentioned in the same breath as Saudi Arabia.
The International Energy Agency said this week fears of so-called peak oil are more or less unfounded in part because of production gains from the United States. Production from the Bakken formation in the Northern Plains states helped move the North Dakota economy from failure to frenzy in roughly a decade's time. Issues overseas, however, are driving domestic gasoline prices higher as oil on the international market stays above the $100 per barrel mark for the first time since last year. (Related article: Why Gas Prices are Unlikely to Fall Anytime Soon)
Those like Gingrich and the American Petroleum Institute said building a pipeline like Keystone XL would shield the North American economy from the overseas turmoil wreacking havoc on retail consumer markets. API says 70 percent of the people it surveyed said Keystone XL would help with national security issues tied to energy markets. A rival survey of public opinion from the Pew Research Center found 83 percent of the people in the United States wanted the government to focus more on domestic issues and leave foreign affairs to the foreigners. For energy matters, however, those two issues mix.
Gingrich and his supporters said a dramatic new way of thinking about U.S. energy potential would shield the North American economy from overseas turmoil. That's done little, however, to persuade U.S. refiners that they're the ones, not retailers or consumers, that have to cover the costs for price increases in the global energy market.