U.S. energy prices are greatly affected by industry demand. The higher the demand for fuel, the more expensive it becomes. Although the economic climate of 2009 should have reduced U.S. energy prices, growing demand for crude oil in other countries has kept the price much higher than is desirable.
Oil consumption worldwide increased by 28.6% between 1978 and 2004. It is only a small amount less than that, 25.8% of this year’s increase alone, that China is responsible for. South Korea’s demand for oil rose by a staggering 344% from 1978 to 2004, also widely increasing demand for oil. This growth in demand for oil has driven prices up to approximately $70 a barrel in the last quarter of 2009, from just $12 at the start of 1999.
You should also understand that the price which revolves around crude oil influences other fuel costs. You will find that electricity, gasoline and petroleum are the big three. It’s crazy to think that even though we’re going through a stressful time, prices are expected to rise when we reach 2010. This is because we’ll be well above our 1.25 million barrels we use each day right now.
The good news is we can expect it to drop again around the fourth quarter of 2009. Unfortunately, when the prices do go back up, we can easily expect a 40c per gallon increase in between those times. While this may true on the gas side of the things, the electricity prices are supposed to decline by 2% thanks to cheaper fossil fuel prices.
Let’s face it, as of right now the economy is unstable and the U.S. energy costs are even more uncertain. The only way for the demand to get lower is by companies and small businesses no longer being able to afford the spike in prices. This usually occurs when fuel prices rise and are considered to high. On the surface this would look like a complete downfall, but eventually everything will pick up again. What it comes down to is a difficult balance between crude oil sales and everyone relying on one another. Eventually we’ll see the fuel prices rise again when the crude oil prices do.
The first half of 2009 saw a substantial fall in electricity consumption, in the U.S. Electricity sales declined as businesses and residential properties cut back to save money. An uncertain economic climate was responsible for a 4.4% decrease in comparison with 2008. However, the second half of 2009 was more positive. The decline leveled out at a less significant 2.3% decrease in electricity consumption. U.S. energy prices should remain low in the fourth quarter of 2009 before steadily rising again next year as industry improves and the economy settles. Electricity prices are not exempt from this, with estimated declines of 2% in 2010.
When anyone discusses U.S. energy prices, the mention of the economy is soon to follow. It’s safe to say that the recession is far from over, and could take at least another year for positive turnarounds. However, as long as there is uncertainty in the financial industry, it’s hard to say when this increase will actually take place.
One thing you will notice about crude oil prices is that they try to guess where the economy is headed. If it looks as though the U.S. is about to recover and prices rise, this boosts the cost of gasoline and petroleum. Then again, when there is an obstacle that comes to the forefront, the costs either remains stagnate or simply tumble until something else comes along. Take for instance the unemployment benefit claims. Even though they have declined, the level of unemployment still isn’t at an acceptable level.
With the lowered demand for energy, fuel stockpiles are much higher than expected. This is lowering the price, as more is available. Natural gas, for example, has stockpiles close to reaching a 5-year high. It will be a long time before demand outstrips supply once more and prices will significantly rise. However, while prices remain low, industry should be encouraged and the economy will be on its way to recovery.
What it comes down to is the U.S. energy prices have declined due to the lack of demand. However, as long as the economy fluctuates throughout the world, prices will continue on their roller coaster ride. Early on in 2010 expect to see a gradual increase in gasoline costs, but for now, enjoy the decrease.
