According to a former executive at Shell Oil, we should expect to see gas prices go back up by the fall of this year. The reason? American oil producers are idling their oil rigs in this time of overabundant supply:
In an interview with CNBC, former Shell Oil President John Hofmeister predicts that U.S. oil could skyrocket from the current levels under $48 a barrel to $80 by this fall, just as consumers are getting used to the windfall from lower gas prices. That would force gas prices to double, from the current $2 to a whopping $4 by next winter. . . .
He says U.S. producers have idled 500 rigs over the past four months as oil prices plunged. He says the result of that production slowdown eventually will be felt at the pump. This month, Baker Hughes reported that U.S. drillers had taken a record number of oil rigs out of service amid the price slump. Last week alone, oil rig counts tumbled by 55 to 1,366.
This is not good news on numerous fronts. For one, this would be a perfect time for American oil suppliers to edge out foregin supply. OPEC has already made it fairly clear that they will not be reducing their exports. This has been one of the major reasons for the price dip in the first place. Secondly, and most obviously, it will mean that the consumers will, again, be paying high prices at the pump by later this year.
For the time being, it has been quite refreshing to be able to fill up for less in a time when inflation, underemployment, and higher taxes have increased the cost of living for most Americans. I guess we all knew it wouldn’t last. Obama is sure to veto the Keystone Pipeline bill, so that will likely have little effect on gas prices as well. Looks like we all should do what we can in the meantime to actually save our savings at the pump. We might need it come winter.