Federal government energy experts are predicting gas prices will remain below $2.00 a gallon for the year — the lowest projection for gasoline prices since 2004.
“For the first time since 2004, U.S. drivers are expected to pay an average of less than $2 a gallon for regular grade gasoline this year,” Adam Sieminski, administrator of the Energy Information Administration (EIA), said in a statement Tuesday. “Lower crude oil prices, which have fallen more than 70% since the summer of 2014, are the main driver of cheaper gasoline prices…[c]ontinuing increases in global oil inventories are expected to keep oil prices under $40 a barrel through August.”
The EIA is predicting the average American gasoline price will be $1.98 per gallon in 2016 and $2.21 per gallon in 2017. In comparison, the average cost of gasoline in 2015 was $2.43 per gallon. The average gas price in the United States is currently $1.73 per gallon, according to the American Automobile Association (AAA).
Gas is cheap largely due to increased U.S. oil production and weak economic growth in China. In America, hydraulic fracturing and horizontal drilling has unleashed vast oil reserves and helped energy prices drop 41 percent over the course of 2015.
Americans spent $370 billion on gasoline in 2014, meaning even small decreases in the price of gas are equivalent to huge sums of money for the average consumer. The huge drop in gas prices is equivalent to $102 billion in savings for the country. The average American household likely saved $700 to $750 at the pump in 2015, according to analysis by the EIA.
Most economists agree low prices at the pump are also enormously beneficial to American households, which tend to use cash not spent on gasoline to save more or pay down debt. Others claim the extra money is spent on luxury goods, such as dining out at restaurants. Cheap gasoline disproportionately helps poorer families and other lower-income groups because fuel costs eat up a larger share of their more limited earnings.
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