Might memories of skyrocketing fuel prices be a think of the past? With pumps in a growing number of states now set at less than $3.00 a gallon, several new reports suggest that motorists might be in for a break in the months – perhaps even years – ahead.
That said, experts caution that a variety of factors could still hammer motorists – and the economy, whether short-term problems with refineries and pipelines or more serious issues, such as disruptions in the Mideast.
“We expect we’re going to see crude oil prices (continue to) fall for a while,” said Charles Chesbrough, a senior economist with IHS Automotive, a position echoed by a growing number of other studies, including a new report from the U.S. Energy Information Agency, or EIA.
There are a variety of factors behind the downward trend, including both a surge in petroleum production in places as varied as the U.S., Brazil and the Mideast, as well as declining demand as the fuel economy of new vehicles continues to rise. Fuel economy hit a record level last year, according to a separate government report released this month, while a monthly study by the University of Michigan Transportation Research Institute, or UMTRI, indicates mileage will reach another record for all of 2013.
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Whatever the reason, the daily survey of fuel prices by the AAA finds the typical American paying $3.216 a gallon for unleaded regular on Wednesday, December 18th, down four cents in a week. But that’s also down around 80 cents from what much of the country was paying earlier in the year.
Meanwhile, prices are running as low as $2.839, on average, in Oklahoma. Even in Hawaii, normally the high spot in the country for fuel, prices have slipped below the $4 mark, according to tracking site GasBuddy.com. Motorists in Amarillo, Texas are paying the lowest price in the country at an average $2.788.
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Equally good news for consumers is that they’re not using as much fuel. According to the EPA, the typical vehicle sold during 2012 averaged 23.6 mpg, a 1.2 mile per gallon increase compared to the year before. Meanwhile, mileage hit a new record of 24.8 mpg in November 2013, reported UMTRI.
Add the forecast by the U.S. Energy Information Agency that the use of hydrocarbon- based fuel by American motorists will continue to decline due to not just better fuel economy but a slowdown in driving by American motorists. That combination could contribute to stable and, at least in the short-term, lower prices, according to a new EIA study.
The annual increase in miles traveled in light-duty vehicles will average a modest 0.9% from 2012 to 2040, predicted the energy agency, revising earlier estimates that motorists would drive an additional 1.2% annually through 2040.
And the agency said that when better mileage is factored in, there will actually be a 25% decline in energy consumption by light vehicles between 2012 and 2040.
“EIA’s (revised forecest shows that advanced technologies for crude oil and natural gas production are continuing to increase domestic supply and reshape the U.S. energy economy as well as expand the potential for U.S. natural gas exports,” said EIA Administrator Adam Sieminski, adding, “Growing domestic hydrocarbon production is also reducing our net dependence on imported oil and benefiting the U.S. economy as natural-gas-intensive industries boost their output.”
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The new EIA report delivered a number of surprises, among other things noting that the fossil fuel share of U.S. energy consumption will continue to decline, although it is expected to still account for about 80% of the country’s total energy mix by 2040.
Even then, the U.S. is becoming less reliant upon foreign sources for petroleum, particularly the Mideast, thanks to expanding domestic production. The EIA forecasts U.S. wells will deliver an extra 800,000 barrels of oil per day through 2016, when it anticipates domestic production will approach the historical high of 9.6 million barrels per day reached in 1970.
On a broader scale, when factoring in all forms of energy used by consumers, the EIA study projects that energy use per capita will decline by 8% from 2012 through 2040 as a result of improving energy efficiency and changes in the way energy is produced and used.
Joe Szczesny contributed to this report.