COLORADO SPRINGS — Economic expert Tatiana Bailey talks about petroleum prices, and how despite their drop in prices they will remain high for the foreseeable future.
Gasoline prices at the pump dropped to $4.30 from $5 earlier in the month. While that’s an improvement, energy prices are still up 41.6% compared to a year ago and gas prices are up 60%. According to Bailey, energy prices tend to be volatile due to cartels that manipulate supply in order to price-fix, and consumers have been dealing with the negative impacts for decades.
Also, volatility in oil prices and high oil prices are so impactful on economic growth because petroleum is used in many products and processes aside from transport and heating purposes.
“Petroleum is also essential for many chemical reactions to make other products,” said Bailey. “And it’s clearly essential to powering the trucks that bring us pretty much everything we consume.”
Diesel prices are over a dollar more per gallon at $5 per gallon than they were a month ago.
So will these astronomical increases in energy prices abate anytime in the future?
Looking at the short term, Bailey said gasoline prices will stay elevated during the summer months, because people are willing to pay more to take those road trip vacations. After summer, gas prices typically fall.
The long-term trend is for gas prices to remain high, but Bailey predicts they will not be as high as previously seen. “People will be pulling back purchases, including gasoline because the economy is slowing,” Bailey said.
Beyond 2022, the U.S. could be impacted by the worldwide decline in fossil fuel investment, as investors are skittish about the push towards renewable energy.
“There’s the reality that crude oil is a finite resource, meaning it’s harder to find and therefore more expensive to develop,” Bailey said. “We can’t pivot overnight to renewable sources like solar and wind.”
That means consumers should expect to pay more for petroleum products as a whole for the foreseeable future.