• Dr. Anna

Paying at the Pump

Oil price movements impact the daily lives of Americans as well as others throughout the world. Over a 40-year period, the tightness or expansion of the balance between supply and demand determine oil price movements as an outcome of the movement of crude oil stocks and the amount of production in the Middle East, Northern Europe, Africa, North America and South America. Some countries, like Venezuela, produced abundantly in the past, generating wealth for its government and employment but eventually exports fell to negligible levels. On the other hand, oil production in the United States ramped up with the discovery of “fracking” techniques, and more recently additional drilling techniques led to higher production in West Texas. Brookings summarized underlying supply and demand shifts thoroughly in December 2018.

So, what are the deciding factors contributing to the outlook for oil prices in the next five or even ten years? Factors to monitor are the:

  1. Possibility of a global recession triggered by the economy in China

  2. “Green” initiatives that reduce the demand of oil

  3. Reductions in demand attributable to lower “miles driven”

  4. Popularity and feasibility of alternative energy sources

To summarize, many factors contribute to oil prices, and ultimately the price paid at the gas pump. Electric vehicle usage could also play a part in possible soft crude oil prices in the next five or ten years