Where Are Gas Prices Headed?

The advantages of having a short commute to work seem pretty obvious.  Less stress driving in congested traffic, more time at home with the family and of course less money spent at the pump.  We all have better things to spend our money on than gas, right?  Gas prices are about to change dramatically and become a much more important factor in deciding where to live and how we get to work.

Gas prices this Christmas were at an all time high with an average of over $3 dollars per gallon. Normally, prices at this time of the year are low and we do not see prices in this range until summertime.  So what is going on here?  According to oil and gas experts, we are experiencing structural changes that are putting increased pressure on the supply and demand formula for oil which is translating into higher prices.  Essentially, the situation we saw several years ago with gasoline prices pushing $4 per gallon is coming back around.

Fox Business Oil and Gas Analyst Eric Bolling has predicted that we are going to see gas prices averaging $4 per gallon again by next summer.  World demand for oil has increased, but production has been steadily decreasing which is causing oil prices to rise.  This is not necessarily a bad thing for oil companies who see profit margins rising as a result.

Former president of Shell Oil, John Hofmeister, has made a prediction that by 2012, we could see sustained gas prices of $5 per gallon.  If the current conditions of increased demand and lower production continue, there will be increased upward pressure on pricing.  While no one knows for sure if these higher prices will indeed become a reality, it becomes apparent that any steps we can take now to reduce our commute time to work or utilize alternate transportation methods such as public transportation or carpooling, will go a long way in protecting our household budget down the road.

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