U. S. Energy Prices
When we look at the U.S. energy prices of late, everything revolves around the demand issue. A prime example of this is the higher demand in oil, which makes gas prices soar. Even though we would have expected a steep decline, the demand in other countries has kept the prices high.
Looking back between 1978 to 2004, the rise in consumption was around 28.6%. If you like numbers, this year alone, China’s increase was 25.8%. Even the demand in South Korea has skyrocketed over the years by nearly 344%. It’s to imagine that right before we hit the new millennium, the cost for a barrel of oil was only $12. Today it is roughly around $70.
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.
The good news is we can expect it to drop again around the fourth quarter of 2009. Unfortunately, when the prices do go back up, we can easily expect a 40c per gallon increase in between those times. While this may true on the gas side of the things, the electricity prices are supposed to decline by 2% thanks to cheaper fossil fuel prices.
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.
We saw a huge fall in electricity consumption the first part of 2009 due to businesses and households cutting back to save money. The economy is also to blame for the 4.4% decrease from 2008. By the second half of 2009 though, this decline leveled out at a 2.3% decrease, and it looks as though the U.S. prices will remain lower until the end of the year. Once the economy settles down, the industry will be able to improve and build upon rising costs once again. Then again, electricity prices are estimated to decline by 2% in 2010.
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.
Probably the worst part about crude oil prices is that they try to predict where the economy is going. If by chance it looks as though things are going to turnaround, all the sudden the prices rise. Then again, if by chance there is more hardship along the way, the costs either stay the same or drop. A good example is the unemployment world. The benefit claims have declined over the recent months, but the unemployment is still at an unhealthy 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.
About the author: Jerry Dyess has been specializing in the Commercial Energy market segment for many years and written articles on Business Electric prices.
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