Monday, May 25, 2020

Low Gasoline Prices: How Long Will It Last?

It is very likely that you may have noticed the latest price of gasoline when you visited your local gasoline station. And, you may even have left the station with a smile. Well, that's what low gasoline prices do and with the gasoline price reaching an all time low, it will surely make everyone who owns a car very happy.

However, this will usually make people ask the question on how long will this price trend last. And, it will also make people ask why the sudden decrease of gasoline price.

First of all, you need to remember that the gasoline price decreased because there is a significantly high supply of oil in the world market. However, because of the low demand for oil, oil companies sold their products at lower prices in order to increase the demand for it.

The reason for the oversupply of oil in the world market is that oil companies anticipated Asia to increase oil consumption. Early this year, Asia consumed a lot of oil that had oil producers and companies worried that the oil reserves they had weren't sufficient to keep up with the demands. So, what they did is that they increased production and stored vast reserves of oil.

However, because of the world financial crisis, the Asia growth was halted prematurely and the demands for oil decreased significantly. The US demand for oil also decreased because of the financial crisis along with Europe and other parts of the world.

So, will this price trend last?

Unfortunately, it won't. The oil supplies will eventually get lower as time passes and if there is an increase in demand, the price of gasoline may rise again. It really depends on the demand for gasoline and oil as well as the production of oil.

OPEC will announce a production cut. In fact, there are speculations that OPEC will cut production of oil by a million barrels a day. Russia also indicated that they will join OPEC in lowering its output or production of oil. It is even expected that OPEC will try to cut down production of oil by 1.5 million barrels.

However, the price increase in gasoline isn't due any time soon. Because of the severe recession in the United States combined with signs of slowing growth around the world, the price of oil will be kept from rebounding further.

Experts agree that the low gasoline price trend will continue on at least by the end of the year. So, you may want to take advantage of the low oil price while it lasts. It will eventually go up again sooner or later.

With the constant demand for oil around the world along with the planned oil production cut between OPEC members along with Russia, you should try to expect that the price of gasoline will significantly rise.

Also, if the economy improves, you can also expect the price of gasoline to increase.

As you can see, the recent price of gasoline is not permanent. It will demand on the law of supply and demand. It will also depend on the world economy. If there is a change in oil supply or even demand by even a little bit, you will see a huge change in the price of gasoline. That's basically how gasoline prices work. It will depend on the supply and demand for oil.