WASHINGTON, May 20, 2015 – It’s good news for motorists. An energy economist from Purdue University, Wally Tyner, says that even though gasoline prices inched up recently, this summer they should be “considerably lower” than last year.
"The best bet for this summer is that gasoline prices will generally remain below $3 a gallon, except in California and Hawaii, where they are normally higher than the rest of the country," Tyner said.
Last week’s national average of $2.69 is 98 cents less than the same time last year.
Tyner says the gas prices are driven by crude oil inventory, global demand and supply disruptions.
He says the inventory of crude oil continues to rise in spite of dropping U.S. production last month for the first time since 2013. It’s not profitable to invest in some shale oil fields when crude oil is ranging from $50-$60, Tyner says. When inventories levels are high, prices tend to stay down. The current inventory is 485 million barrels compared to a normal inventory of 350 million barrels.
Global demand has grown slightly faster than previously predicted, though, so Tyner says that could bump prices up. Also, any disruption in supplies could lead to a short run of price spikes. Currently, there is instability in such countries as Libya, Iraq, Nigeria and Venezuela, all important oil-producing countries.
"Greater instability or political or military unrest in any of these countries could cause prices to move higher," Tyner said.
He also said that, longer term, a nuclear deal between the U.S. and Iran lifting sanctions could pump more Iranian oil into the world market, creating lower gas prices. "That could result in a price drop at the pump of as much as 30 cents in 2016," Tyner said.
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