Gas prices have replaced lottery jackpots as the numbers to watch for most Americans. While the dream of a huge payout can happen for a lucky few, the good fortune of a tank of gas that does not take a large chunk of everyone’s weekly paycheck feels like a stroke of good luck for most budget-conscious drivers. This is especially true in Houghton Lake, Michigan, the first place in America where the price of a gallon of gas has dropped below the one dollar mark.
WEYI, an NBC affiliate in the Flint/Tri-Cities area, reported gas prices as low as 47 cents a gallon. The low price, which some have speculated to be the result of a price war between rival retailers, was first reported on Gasbuddy.com, a website that tracks the best fuel prices. Early morning Sunday, the news that gas could be had for 97 cents and then shortly after that, 77 cents per gallon, caused many people to watch the prices in the mid-Michigan town. By lunchtime, police were called in to direct traffic as hundreds of drivers braved the snowy weather to buy gas at prices many older Michiganders have not seen since David Bowie’s “Young Americans” was a new release in 1975.
— Local 12/WKRC-TV (@Local12) January 18, 2016
Why are gas prices dropping? There is no single reason for the current price of gas, but many key factors come into play with those numbers at the pump. The first thing many people think of when gas prices go up or down is the political climate in oil-producing countries and their neighbors in the Middle East. Unrest in North African countries and changes in the temperature of relationships between Eastern and Western nations can effect the price of a gallon of crude oil.
For the past two years, the average price of a barrel of crude oil has stayed around a $100. BBC World News reports that the current price is around $28 per barrel and could go lower. Experts point to Western nations’ decisions to lift sanctions against Iran as a cause for the most recent overabundance of oil and the resulting drop in prices at the pump.
Other sources point to a temporary surplus of fuel due to decentralized production. Increased drilling in the United States, Canada, and Russia created more competition for exportation to countries that are experiencing higher demand for gasoline. Changing consumer habits on places with high population density, such as the emerging consumer culture in China, have shifted the competition from the ruble, the pound sterling, and the dollar to the yuan.
Regular observers of the oil industry suggest it could be years before prices per barrel return to their previous average. While many may find gas prices that stay to the right of the decimal point to be a cause for celebration, this could have a chilling effect on the economy. British Petroleum has already responded to the drop by eliminating 4,000 jobs, and other companies followed suit by making deep cuts in the number of new projects and retained personnel. Clifford Krauss reported in the New York Times that as many as 250,000 employees could be face layoff or termination as a result of the steep drop in gas prices.
— GasBuddy (@GasBuddy) January 14, 2016
Over the years, American drivers have seen much gentler increases in the price of gas than their United Kingdom counterparts, who, during the peak price days of $100 per barrel, paid around 3.00 GBP or $4.29 USD per liter, bringing the price of a gallon of gas in England to around 11 pounds sterling or $16 U.S. dollars per gallon. The current price in the U.K. is roughly 1 pound per liter. In countries who have enjoyed very low prices, the narrative has flipped. ABC News reported on January 15 that Qatar, a country that often enjoys some of the lowest prices per gallon in the world, has seen one of the steepest increases in a long time. The cost per gallon in the desert nation has jumped from 0.85 Qatari riyals ($0.23 USD) to 1.15 Qatari riyals or $0.31 in U.S. dollars.
Will Americans and their allies see even lower prices, possibly even at levels that rival the rates in Qatar? Gas prices have often been a barometer of financial health and stability worldwide. For now, many forecasters who watch the prices at the pumps are advising everyone to fill up for now.
[Photo by Joshua Lott/Getty Images]