Oil is currently trading at $123.61 per barrel for Brent crude, which is part of the reason why gas prices have been creeping skywards over the past few months. While the factors determining the cost of a barrel of oil are remarkably complex, this much is easy to understand: pricing is still very much a matter of supply and demand. Reduce supply, and prices go up. Increase demand, and the same thing happens.
Although current global output is up, so is global demand. Put another way, gas is expensive in Ohio because more people in Beijing are driving cars. That’s not likely to change any time soon, so unless worldwide oil production skyrockets, the price of gas isn’t likely to get significantly lower. Even tapping into the strategic petroleum reserves held by the U.S. (a tactic tried last June) will only have a minor impact on pricing; last year, it lowered prices for a few days, but they spiked higher less than a month later.
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If crude oil pricing does jump to the $200 per barrel mark discussed by CNBC, expect to see a significant price increase at the pumps. While gas prices may not rise in the same linear manner as barrels of oil (since many factors go into pricing a gallon of gas), it’s likely to expect that $200 per barrel crude would result in gas prices above the $6.00 per gallon mark.
Since the price of oil impacts everything from the cost of food and consumer goods to airline travel, we could be in for a very unpleasant blow to an economy that has yet to regain its footing.
Image credit: Flcelloguy at the English language Wikipedia
Kurt Ernst has been passionate about automobiles and driving nearly his entire life. His early years were shaped working in the family service station, though his real passion was auto racing. After graduating from the University of Colorado, Kurt spent a year club racing with the Sports Car Club of America, before focusing on a business career in marketing and project management. Later, his passion for writing and the automotive hobby found him freelancing for a variety of automotive news sites, including Automotive Addicts and Motor Authority, where his work was syndicated and appeared in several national publications. Recognized as an expert in the automotive field, Kurt joined Hemmings Motor News as an Associate Editor in 2013, and in the years since has progressed to Editor, Hemmings Daily; Managing Editor for Hemmings Motor News, Hemmings Classic Car, Hemmings Muscle Machines, and the Hemmings Daily; and now, Managing Editor, Hemmings Auctions. Kurt was instrumental in organizing the Hemmings Motor News Concours d’Elegance from 2013-2019, and has served as a judge at this event and The Vintage Racing Stable Concours d’Elegance. A Skip Barber Racing School graduate and prolific writer, Ernst is also skilled in copyediting, project management, brand development, and public relations.
