Will Gas Prices Ever Go Down?

Gas prices are on the way back up and hard to ignore. The question for many people is will gas prices ever go down again or are we looking at an expensive future?

Gas prices will go up and down over short intervals of time. They might be a bit up one year and then down the next. This is due to the influence of temporary situations. For instance, prices shot up in 2008 as speculators bought up oil commodity contracts. The price of oil went to an unheard of $140 a barrel. Many thought the end of the oil economy had finally come, but 2009 started off with oil under $40 a barrel as the economic disaster hit. These are both examples of short term fluctuations that have happened with oil and gasoline prices and represent the type of events that will happen in the future.

The long term picture for oil paints a very different picture indeed. The general trend every decade will be for prices to go up. This is true if for no other reason than inflationary pressures. Consider what gas prices have done since 1940:

  • 1940     $0.18 a gallon
  • 1950     0.27
  • 1960     0.31
  • 1970     0.36
  • 1980     1.25
  • 1990     1.13
  • 2000     1.49

The general trend is up. That being said, there is a bigger problem these days than just a gradual price increase. That problem is found in the concept of supply and demand. We have roughly the same level of oil production that we’ve always had. The problem is the amount of demand is skyrocketing.

The world produces roughly 84.5 million barrels of oil a day as of 2009. It consumes roughly 84 million barrels. Of this, the United States consumes about 19.5 million barrels. China, with a much bigger population, consumes only 8 million barrels a day. China and India, however, are modernizing and starting to need more and more fuel. In fact, estimates are the world will need 119 million barrels a day of fuel by 2020. Nobody is really sure where we are going to find an additional 35 million barrels of oil a day.

What is clear is the simple fact that demand is going to continue to climb and supply is going to continue to be under pressure. Will gas prices ever go down? While there may be the occasional downward dip, the future trend will undoubtedly be for prices to go up overall. Perhaps significantly so.

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