The days of U.S. pump prices below $3 a gallon are likely over despite a boom in domestic production and waning demand in the states.
Chris Plaushin, director of federal relations with AAA, told the Senate Energy and Natural Resources Committee at a hearing this week on fuel prices that motorists shouldn't expect gasoline prices to ever fall below $3 again, reported The Hill.
The national average price of gasoline on Jan. 1 was $3.29 gallon, the highest-ever starting point for a year, Plaushin said.
Concern over gas prices rises and falls with the seasons and economic health of the nation. However, this development is notable because it's coinciding with a resurgence in domestic oil production and a sustained and steady drop in demand as automakers improve the fuel economy of vehicles.
Politicians, oil lobbyists and officials disagree about why gas prices have remained high. Some argue the U.S. gas market is susceptible to swings in price because it's dependent on a small number of refineries. When one refinery is taken offline for maintenance or due to a natural disaster, prices shoot up, they say.
Others noted in the hearing that oil prices are determined on the global market. And some in the oil industry argue the renewable fuel standard is pushing prices higher.
Regardless, if prices remain stubbornly high for a sustained period of time, it will impact more than consumers' pocketbooks.
For one, the oil industry will continue to invest in technology aimed at increasing the efficiency and lowering the cost of oil exploration and production. And some politicians will likely continue to press for greater fuel effeciency standards. Higher gasoline costs may also help spur the small, but burgeoning movement towards natural gas-powered vehicles.
More than 1,000 natural gas fueling stations are spread across the U.S, about half of which are open to the public, reported BusinessWeek. The rest serve commercial fleets. There are about 120,000 natural gas-powered vehicles on U.S. roads today, according to Natural Gas Vehicles for America. There are more than 15.2 million such vehicles worldwide and that number is expected to reach 25 million by 2019, says Navigant Consulting.
Photo: Flickr user Steve Snodgrass
This post was originally published on Smartplanet.com