Lower Gas May Be Worse For the Economy Than You Think

According to the former president of Shell Oil, United States consumers should not get used to these dipping gasoline prices and can expect prices to hit $5 a gallon. In 2010, he estimated that gas would hit $5 by 2012. While the national average made it up to around $4, it never made it to the amount he proposed. Currently, gasoline prices are averaging $2.05 a gallon, a price not seen since 2009.

Lowered gas prices have made motorists and homeowners happier nationwide. This may be a short-lived joy, as the price of crude oil may begin significantly to rise throughout the year. Capacity constraints related to the demand of oil production will determine how high prices go. While gas prices have been on the decline in 2015, this trend may not continue. Further, in addition to the demand of oil not being able to keep up with production, some places in the world may even find themselves with fuel shortages.

Why are lower gas prices a bad thing?

According to the United States Energy Information Administration, prices for gasoline are expected to rise again, but stable out around $2.50 per gallon. Industry experts disagree. The laws of supply and demand do not seem to support a sudden and extreme drop in gas prices, which means a sudden rise should be expected soon.

Consumer happiness aside, the reduction in gas prices can have a larger impact on the economy. States such as Texas, Louisiana, North Dakota, Alaska, and Oklahoma derive a significant source of income from their energy industries, which also employ numerous citizens in those states.

Houston, home to one-third of the nation's oil and gas jobs, may see:

  • Decreased production
  • Lowered revenue
  • Multiple layoffs
  • Increased unemployment
  • Reduction in well-being of the local economy
  • Domino effect shuttering real estate, retail, and banks

These heightened gas prices have been a source of tension in the American economy for years. Consumers have struggled to afford even simple necessities, such as heating their home. In order to combat this, gas and oil experts are suggesting an overall switch to natural gas usage, especially in the transportation industry. This would reduce the overall demand for oil and reduce the cost per barrel over the long run. However, with the increase in global oil supply, workers in oil and gas and other industries may suffer.

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