The United States has seen a decline in oil and gas prices in the last month. As consumers ease into lower gas prices, there seems to be a disconnect between the good news and the reason why gas prices have fallen.
Specifically the United States has seen the decline in prices because of change in supply, and a possible future change in demand. The supply of oil has greatly increase in the last month. Supply lines have unkinked, unleashing more oil than we have seen since Russia has been at war with Ukraine. The worlds oil rigs have also been back in full-swing, in fact there are 3 times as many oil rigs in function since 2020. Additionally G-7's price caps based on Russia's oil has not changed prices as dramatically for consumers as feared.
However, where can demand change in the future? As speculations of a recession pop up, analysts wonder if demand for the new efficiency for oil will decreases as the mindset about the market falls. Mindsets seem to be weary about the future of the economy, the amount of gas consumed at this time of years is lower than usual. The question for the future of gas prices lays within the outlook on the future of the economy.
Will economic outlook, and demand beat out supply?
I enjoy the way this article shows how in the short run, lower oil prices can look enticing and positive, while the long run can drastically change that outlook. If the recession comes, oil prices are sure to jump back up and could possibly hold those prices instead of staying low like they are now.
ReplyDeleteI like how the article acknowledges both the short and long run of the economy with the price of gas, it acknowledges that prices are nice and low currently but depending on how things go with the worldwide situation alongside changes in demand the oil prices may increase again especially if a recession occurs like many are anticipating
ReplyDeleteOil prices are likely to rise in future due to the Russia-Ukraine war as well as OPEC's decision to lower production, does not seem like this current reduction will last for long. We should also take into consideration, a massive slowdown in the economy which can justify the reduced demand for petroleum. With the recent increase of rates from the FED we can only expect the price to increase.
ReplyDeleteI saw today that gas prices are at their lowest in months. The issue you raise of them increasing is valid. I saw an article today that predicted gas prices will sky rocket again.
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