9/3/2013 6:15 PM ET|
Why bombing Syria won't affect gasoline prices
In times of war or peace, the Middle East no longer exerts the tight grip on consumers that it held for decades. Here's why.
Curious thing about the turmoil in Syria -- it suggests that America is breaking its decades-long oil addiction.
Chaos in the Middle East usually sends pump prices soaring. Not this time. Heading into Labor Day, gasoline averaged $3.59 a gallon. That's a slight increase over the past week. But gasoline still dropped 6% from a year ago and a few cents over the past month, according to the AAA's Daily Fuel Gauge Report.
One reason for the falling prices has been a decline in usage. American drivers burned through 9.1 million barrels of gasoline a day in 2007, according to the Energy Department. That average dropped to 8.4 million.
"We are seeing the beginning of the end of an era of high gasoline prices," said Phil Flynn, senior market analyst for the Price Futures Group. "We are as a country better positioned in our gasoline market than we have been in decades."
There are several reasons for this:
- OPEC no longer has as tight a grip over consumers as it did during the 1970s, as new fracking technologies have boosted domestic oil and natural gas reserves by more than 35%, according to the Energy Department. North Dakota has suddenly emerged as the center of an economic boom.
- An aging population means drivers are logging fewer miles on the road, so baby boomers will likely demand less gasoline with each passing year. The Federal Highway Administration found that drivers between the ages of 55 to 64 years old average 11,972 miles on the road, a total that drops to 7,646 once they pass the age of 65.
- At the same time, gas mileage has improved. President Barack Obama raised fuel standards last year, mandating that cars and light trucks will average 54.5 miles-per-gallon by 2025. This should save $8,000 over 13 years for a typical American family, according to White House estimates. "These fuel standards represent the single most important step we've ever taken to reduce our dependence on foreign oil," Obama said at the time.
- Over the last year, electric car company Tesla Motors (TSLA) has become a darling of Wall Street investors and Consumer Reports -- which gave the Model S its highest rating of all-time. Despite the mixed reception of the Chevy Volt and Nissan Leaf, Tesla's rise has analysts believing that the era of gasoline engines is drawing to a close.
This all indicates that -- despite seasonal differences -- daily gasoline usage will continue to drop from its peak of 9 million barrels a day.
"I hate to put numbers on it, but do I think we could get below 8 million? Absolutely," said Flynn. "Could we get below 7 million? Absolutely. . . . We're rewriting history as we speak, writing the last chapter of the gas guzzler."
For all the concerns caused by a lukewarm economic recovery, the United States has -- since the 2008 oil-price spike -- benefitted from its waning reliance on petroleum. The change from last year, when Americans spent a record percentage of their paychecks on gasoline, could not be more pronounced. It just might be the most underappreciated shift in the economy, one that insulates the country from geopolitical shocks such as the potential military intervention Syria that Obama is putting before Congress.
Going lower before heading higher?
In fact, oil and gasoline prices are poised to drop, even if the United States and its international partners retaliate against Syrian President Bashar al-Assad for his use of chemical weapons in that country's civil war.
"Despite some of the rhetoric you hear and saber-rattling about a big Persian Gulf War, you won't see tremendous disruptions out of the region," said Tom Kloza, chief analyst at the Oil Price Information Service. "My instincts tell me we're going to move lower."
Kloza explained that the United States is "much more insulated vis-à-vis global oil price shocks than we were during the first Arab Spring" in 2011, when the governments of Egypt, Libya and Tunisia were overthrown. U.S. production is roughly two million barrels a day higher than in the first quarter of 2011.
Most of the 400,000 barrels a day pumped out by a pre-civil war Syria was exported to Europe. That output has shrunk to 50,000 barrels a day. If the fighting in Syria spread across the Middle East, it would put at risk 1.9 million barrels a day that Saudi Arabia, Iraq and Kuwait export to the United States.
Production in America and Canada can provide 10-million daily barrels -- more than half of what the United States needs.
"Throw in Mexico and other 'friendlies' and we are nowhere near as vulnerable as we were in 2003 or 1990," said Kloza, referring to past incidents in which the United States waged war against Iraq.
But more importantly, the market is pointing to lower prices as Americans come out of what has been a return the traditional summer driving season in July and August. The futures market suggests that gasoline costs for the end of the year will be about $2.90 a gallon, according to Kloza's analysis.
Even if oil prices climb in response to what happens in Syria, U.S. motorists should be safe from any of the swings, Kloza concluded in a written overview.
"Without question, the U.S. will fare better than every other (country) if the sabers are unsheathed," he wrote.
More from The Fiscal Times:
VIDEO ON MSN MONEY
The oil companies will raise the prices, using any excuse, simply because they can and want to.
NBC is trying everything to push this war that a vast majority of Americans want no part of.
Bombing Syria would just give the Evil Religion-dominated OPEC a convenient excuse to raise oil prices. Yet another reason why the USA should leave well enough alone.
What the Dear Leader and his advisors refuse to admit is that it's GOOD for American interests when the Evil Religion is fighting itself. When Evil Religion barbarians are spending all their time, money and manpower killing each other, they don't have any time, money or manpower to spare to kill Americans. What the USA should do is carefully monitor the situation, but not take sides or intervene militarily for as long as the conflict is contained within Syria. The USA will be no better off (and most likely worse off) with the Islamic Fundamentalist, Al Qaeda-backed rebels in charge than with the Assad regime in charge. The USA should just sit back and watch all those filthy Evil Religion animals keep killing each other until they get tired, run out of ammo or until there are none left standing. The only situation where the USA should intervene militarily is if the conflict spreads into Israel.
Can you image what msn would report if a republican was in office.
Typical MSN force feeding us Bull Shi* again.
GAS PRICES ARE HIGH BECAUSE OBAMA PROMISED HE WOULD RAISE GAS AND ENERGY
AND FOOD PRICES WHILE HE PUSHED HIS EPA NAZI REGULATIONS FOR HIS GLOBAL
WARMING GREEN AGENDA WHICH WE ALL KNOW NOW IS A BIG FAT AL GORE AND LEFT
WING PROGRESSIVE LIE! AND YET THEY STILL CONTINUE TO PUSH IT! THEY WERE WRONG
ABOUT ALL THIS CRAP SCIENCE JUST LIKE THEY WERE WRONG ABOUT HURRICANE
SEASON PREDICTIONS THIS YEAR AND LAST YEAR! THIS WAS THE COOLEST SUMMER ON
RECORD IN MOST PLACES ESPECIALLY DOWN SOUTH NEAR THE GULF! FUNNY THE LEFT
MEDIA AND DEMOS WENT CRAZY WHEN GAS WAS 2.50 A GALLON AFTER KATRINA AND
OTHER STORMS BUT THAT IS THEIR FAULT WITH ALL THE REGULATIONS AND SHUTTING
DOWN CHEAP ENERGY PRODUCTION! BUT THEY BLAMED BUSH BUT NOT OBAMA?
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