Low Gas Prices Expected To Continue In 2016 | KUOW News and Information

Low Gas Prices Expected To Continue In 2016

Dec 23, 2015
Originally published on December 23, 2015 3:35 pm

Gas prices are under $2 a gallon across much of the country. That's because crude oil has plummeted to the lowest price in nearly a decade.

The average U.S. household has saved an estimated $700 this year because of lower gas prices. And drivers can expect more savings in 2016.

Recently, Sharlene Brown was filling up her minivan at a Philadelphia gas station. When prices are down, Brown says, she drives more.

"It changes where I go, who I pick up because a lot of times I pick up and do errands for the church," she says.

Lower prices make it easier for her to volunteer more and help out with grandkids. So what's her wish for the price of gas in 2016?

"Hopefully it'll go down some more," Brown says.

That's likely to happen, says Tom Kloza, head of energy analysis with the Oil Price Information Service.

"I wouldn't be surprised to see a year where we might see gasoline prices nationally average between, let's say, $1.85 and $2.75, which will be very similar to this year," he says.

Kloza says the variation will depend on refinery operations near you. Gas prices tend to go up when refineries have to shut down for maintenance or switch to gasoline blends that produce less smog in the summer.

In addition to lower prices prompting people to drive more, Kloza says there's evidence consumers are again starting to buy bigger cars that use more gas.

"I would hope that people might make good choices and buy vehicles recognizing that somewhere in the life of that vehicle we're going to see high gas prices again," he says.

Beyond what it costs the individual driver there are environmental concerns. The U.S. is among countries that pledged in Paris to reduce greenhouse gas emissions and address climate change.

But if people start driving more because of lower prices, that will work against the goal. And there are some in the oil industry predicting that low oil prices will prompt more demand by the second half of 2016.

Amy Myers Jaffe, executive director of energy and sustainability at the University of California, Davis, says she is skeptical of a pickup in demand. She says a big factor will be the choices that members of the huge millennial generation make.

She suspects they will continue to embrace things like carpooling and more efficient hybrid and electric cars. "And car sharing — you know, where you don't own a car but you just rent your car when you're going skiing for the weekend. All of those trends really are going to have a substantial impact — negative on the oil industry and positive on climate solutions," Myers Jaffe says.

She says in a world with plenty of oil reserves, that could eventually lead to an interesting outcome: low gas prices forever because demand is low.

But that's looking way into the future. One thing Myers Jaffe suggests watching closely next year is the big oil states like Russia, Iran and Saudi Arabia. Low prices can make those governments less stable. She says if one of them goes through a significant upheaval or even falls, that could reduce world oil production dramatically and drive up prices again.

Copyright 2016 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

Gasoline is below $2 a gallon in some parts of the country. That's because crude oil has plummeted to its lowest price in eight years. We'll hear what people are doing with the money they're saving in just a moment. But first, NPR's Jeff Brady explains why more savings are in store.

JEFF BRADY, BYLINE: At a Philadelphia gas station, Sharlene Brown is filling up her minivan. When prices are down, Brown says she drives more.

SHARLENE BROWN: It changes where I go, who I pick up 'cause a lot of times I pick up and do errands for the church.

BRADY: Lower prices make it easier for her to volunteer more and help out with grandkids. So what's her wish for the price of gas in 2016?

BROWN: Hopefully it'll go down some more.

BRADY: Her wish most likely will be granted, says Tom Kloza with the Oil Price Information Service.

TOM KLOZA: I wouldn't be surprised to see a year where we might see gasoline prices nationally average between, let's say, 1.85 and 2.75, which will be very similar to this year.

BRADY: Kloza says the variation will depend on refinery operations near you. Gas prices tend to go up when refineries have to shut down for maintenance or switch to gasoline blends that produce less smog in the summer. In addition to lower prices prompting people to drive more, Kloza says there's evidence consumers are starting to buy bigger cars again that use more gas.

KLOZA: I would hope that people might make good choices and buy vehicles recognizing that somewhere in the life of that vehicle, we're going to see high gas prices again.

BRADY: Beyond what it costs the individual driver, there are environmental concerns. The U.S. is among countries that pledged in Paris to reduce greenhouse gas emissions and address climate change. But if people start driving more because of lower prices, that will work against the goal. And there are some in the oil industry predicting that low oil prices will prompt more demand by the second half of 2016.

AMY MYERS JAFFE: I'm a little skeptical of that outcome.

BRADY: Amy Myers Jaffe is executive director of energy and sustainability at the University of California, Davis. She says a big factor will be what choices members of the huge millennial generation make. She suspects they'll continue to embrace things like carpooling and more efficient hybrid and electric cars.

MYERS JAFFE: And car sharing, you know, where you don't own a car but you just rent your car when you're going skiing for the weekend. All of those trends really are going to have a substantial impact, negative on the oil industry and positive on climate solutions.

BRADY: Myers Jaffe says in a world with plenty of oil reserves, that could eventually lead to an interesting outcome - low gas prices forever because demand is low. But that's looking way out into the future, and we're talking about just 2016 here. One thing that Myers Jaffe suggest watching closely next year is the big oil states like Russia, Iran and Saudi Arabia. Low prices can make those governments less stable. She says if one of them goes through a significant upheaval, or even falls, that could reduce world oil production dramatically and drive up prices again. Jeff Brady, NPR News, Philadelphia. Transcript provided by NPR, Copyright NPR.