When it comes to U.S. energy prices, everything seems to be affected by demand. For instance, if there is a higher demand for oil, then the gas prices go up. Oddly enough the economic climate should have lowered the standard cost, but due to the demand in other countries, it’s a lot higher then we would expect.
Looking back between 1978 to 2004, the rise in consumption was around 28.6%. If you like numbers, this year alone, China’s increase was 25.8%. Even the demand in South Korea has skyrocketed over the years by nearly 344%. It’s to imagine that right before we hit the new millennium, the cost for a barrel of oil was only $12. Today it is roughly around $70.
It’s also important to understand that the price of crude oil directly influences the cost of other fuels. The biggest three are electricity, gasoline, and petroleum. Even though the recession was a stressful time, now that things are turning around it’s safe to say it will rise again in 2010. During the downtime, we still used 1.25 million barrels a day.
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.
While the economy remains unstable, U.S. energy prices will be less certain. In the supply and demand chain, if fuel prices suddenly rise too high, demand will decrease as smaller businesses and companies can no longer afford production. However, while prices are on the decline it will help industry pick up again as their profits increase. The delicate balance should be maintained by both crude oil sales and industry relying on each other. Undoubtedly, as the economy picks up speed once more, crude oil prices will increase. It is only a matter of time before other fuel prices follow.
We saw a huge fall in electricity consumption the first part of 2009 due to businesses and households cutting back to save money. The economy is also to blame for the 4.4% decrease from 2008. By the second half of 2009 though, this decline leveled out at a 2.3% decrease, and it looks as though the U.S. prices will remain lower until the end of the year. Once the economy settles down, the industry will be able to improve and build upon rising costs once again. Then again, electricity prices are estimated to decline by 2% in 2010.
The economy is mentioned constantly in relation to U.S. energy prices. As the international recession is far from over, it is expected to take at least a year for demand for fuel to rise back to the peaks of previous years. Since early 2008, prices have steadily declined in response to the sudden uncertainty in finance and industry that had led to worldwide economic recession.
Probably the worst part about crude oil prices is that they try to predict where the economy is going. If by chance it looks as though things are going to turnaround, all the sudden the prices rise. Then again, if by chance there is more hardship along the way, the costs either stay the same or drop. A good example is the unemployment world. The benefit claims have declined over the recent months, but the unemployment is still at an unhealthy level.
It’s hard to believe the lower demand for energy has left fuel prices higher then we would believe. Then again, as long as there is an ample supply available, you can expect the costs to go down. Natural gas however has reached a new 5-year high. Needless to say it’s going to be awhile before the demand actually over trumps the supply. In the end the industry has to stay encouraged in order for us to see it recover.
For now, the U.S. energy prices have declined thanks to the lack of demand. While lower prices are great, the constant fluctuation around the world will continue this crazy roller coaster. So when 2010 rolls around expect to see an increase in gas prices, but in the meantime enjoy the lower prices.
