As the international crude oil glut doesn’t display any signs of easing out, AAA analysts expect gas prices to remain steady or sink even further in 2016.
In 2015, the average price per gallon for unleaded regular gasoline was $2.40, making gas price hit the lowest level in seven years.
According to the American Automobile Association an average American driver saved $550 as compared with a year prior. The savings in fuel costs were most of the times invested in spending and had a positive impact on the economic growth.
Plus, gas remained cheap despite huge domestic demand. This is why Americans drove the greatest distances last year, AAA reported. On New Year’s Eve a gallon was rated at $2 on average, which is the lowest level since Dec. 31, 2008.
More than 70 percent of gas stations nationwide had gasoline at less than $2, the report shows. Other states, such as California, Washington, Nevada and Alaska had slightly higher prices because of refinery outages and issues within the supply chain.
The states with the cheapest gasoline such as Tennessee, Missouri, and South Carolina sold a gallon for $1.72 to $1.75.
For 2016, AAA analysts expect national gas prices to linger around $2.25 per gallon, which is almost the same as last year.
Nevertheless, since international context is far from predictable, prices could fluctuate strongly. For instance, in the best-case-scenario for drivers gas prices could sink to $1.79 per gallon in February because of weak demand due to winter season and global crude oil oversupply.
Texas and North Dakota greatly contributed to the international output since both states continued to produce despite weak demand. Additionally, richer oil producers in the Middle East such as Saudi Arabia reportedly let prices plunge to drive some competitors out of business.
Additionally, Iran pledged that it would produce even more crude so we should expect prices to sink further. The country freed itself from burdening sanctions after it inked a new deal with the U.S.
In the U.S., despite drilling restrictions, supplies won’t be affected since wells in use are extremely efficient. Analysts don’t expect the oil glut to vanish overnight. Still, we should expect prices to rise starting next month as refineries enter the maintenance season.
During the season, prices should not go higher than $2.55. In the worst-case-scenario they could reach $2.8 per gallon.
Image Source: Pixabay
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