We’ve got some good news for you to kick off the new year. AAA compiles data and gas prices across the country, and their annual fuel report projects that gas prices will be staying low in 2016, which is music to all of our ears. The average price per gallon in 2015 was $2.40. 2016 gas prices are predicted to stay between $2.25 and $2.45.
Of course the numbers are effected by highs and lows regionally. For instance, in 2015 California paid the most amount nationwide with the average price per gallon for the year at $3.16. Hawaii, Alaska, Nevada, Washington, and Oregon also saw higher prices than the rest of the country. In 2016, there’s likely to be a similar scenario of regionally elevated prices. What states paid the lowest? South Carolina (annual average of $2.10) followed by Mississippi, Alabama, Tennessee, and Louisiana.
So, what’s causing such low prices at the pump? It all boils down to crude oil supply and demand. Crude oil accounts for around half of the cost of a gallon of gas. The demand right now is low because we have an oversupply of it. As AAA reports, “There is significant uncertainty over the potential cost of crude oil in 2016, though most analysts expect the market will remain oversupplied throughout the year.”
If you’re wondering what has caused a surplus of crude oil, a lot has to do with the production of American shale — natural gas trapped in shale rock. Also a factor, countries are still pumping a surplus even with fallen prices.
But is there a downside to all of this? You may have heard of “fracking,” which is how shale is extracted from the earth. Hydraulic fracking drills deep down into the ground before a water mixture is shot straight at the rocks to release the gas inside them. There are concerns from many people that fracking is bad for the environment because of the amount of water it uses and the potential for groundwater contamination. The upside? America reducing its dependency on the rest of the world, and as we’re experiencing now, lower prices for gas for citizens.
(Image via Flickr/Mike Mozart)