The price for a gallon of gasoline this past Labor Day weekend was the cheapest gasoline has been since 2010. While the national average was around $3.45 for a gallon of regular gasoline, the prices in Louisiana and along the gulf coast saw even lower digits at the pump.
Why? With the international geo-political turmoil in the Middle East, how is the price of oil staying relatively constant? Several contributing factors are keeping oil prices stable and therefore gasoline prices reasonable compared to what they have been in the past couple of years.
First and foremost, the gulf coast and the east coast have yet to experience any major hurricanes this storm season. How does this play into oil and gasoline prices? When hurricanes move into the gulf coast or along the eastern seaboard, typically, the refineries experience unplanned shutdowns. Also, many of the platforms in the Gulf of Mexico halt drilling activity during a large storm. When drilling is slowed and refineries have unplanned shutdowns, the supply diminishes. With a supply decrease and a demand increase due to people fleeing storms, the prices naturally rise. This has not been the case this summer.
Secondly, the supply of oil and natural gas that is being produced domestically has dramatically increased over the past couple of years. Oil and natural gas plays like those in North Louisiana, North Dakota, West Texas and South Texas have greatly reduced our dependence on foreign resources. Organically, when your imports are lower and your domestic supply is greater, a drop in the price of oil occurs causing relief at the gasoline pump.
The third contributing factor to stable prices is this increased domestic supply that can be directly correlated to the process of hydraulic fracturing. Much misinformation exists surrounding this process known as “fracking”. While the green groups and anti-industry voices makes the harsh accusations about fracking, the truth can be seen in the facts.
What are the facts about hydraulic fracturing? Over one million wells have been hydraulically fractured in the United States over a 60-year time span. Over 2,600 wells have been fracked in North Louisiana in just the past five years. While the blogosphere is filled with terrible stories about the process of hydraulic fracturing, the federal regulatory bodies continue to conduct federally funded studies that return inconclusive as to any negative effects from this process.
While it is difficult to give specific credit for stable pump prices this past holiday weekend, increased domestic drilling thanks to hydraulic fracturing as well as a slow hurricane season have all contributed to some relief at the pump. While commodity markets can shift over night, the United States is on a positive path to reaching an energy secure future. Not only are the pump prices remaining somewhat stable despite international chaos, but also the job market appears to be on an upward path to recovery. Amidst reports of wars, conflicts and hard times, the energy sector continues to offer a glimmer of hope to our nation’s economy and general morale.