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U. S. Energy Prices – Cause and Effect
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.
However, you will see a drop again around the latter part of 2009. When we reach the increase though, you can expect to see a rise of 40c per gallon on gasoline. Even though this will be a major cost increase throughout each month, the good news is there will be a slight decline in the electricity side of things.
Even though the economy is unstable, the U.S energy costs will be even more uncertain. If small businesses and other companies can no long afford their production, then the demand will become lower. This usually occurs when fuel prices reach a threshold that is considered to be too high. Even though this can seem like a downfall, the industry will be able to pick back up again. It’s basically a balance between crude oil sales and the industry having to rely on one another. Once the crude oil prices pick up though, it’s only a matter of time before the fuel prices do as well.
When looking at electricity consumption through the first half of 2009, there was a large decrease. In fact, according to sources the decreases fell short of 5% by only .6% in the prior year. In the second part of 2009 though, the decline has leveled out to around 2.3%. Hopefully the prices can remain low for the remainder of the year. When the economy settles though, the industry will start to receive their increase in costs once again.
Whenever a conversation starts with U.S. energy prices, the economy are enters in the blink of an eye. We can definitely say the recession is far from over, and it might take another year or two in order to see positive changes. Unfortunately, as long as we’re all uncertain, the increase could come out of nowhere.
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.
Oddly enough, the lowered demand for energy has still left the fuel stockpile prices higher then we expected. Keep in mind this is lowering the price since more is available. However, items such as natural gas have reached a new 5-year high. Thinking ahead; it will be a long while before demand supersedes the supply and prices rise. If the industry stays encouraged during this time, it will be well on its way to recovery.
Overall, U.S. energy prices have seen a decline in response to the lack of demand from industry and exports. While the worldwide economy stays uncertain, prices will only be able to rise so much before being cut back again. Electricity and gasoline prices have decreased in the fourth quarter of 2009 and will stay low in early 2010 before seeing gradual rise before the end of the year.
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